Trump-Xi Summit Opens Amid Taiwan Demands and Doubts Over Major Trade Deal

President Donald Trump is scheduled to arrive in Beijing on May 14 for a two-day summit with Chinese President Xi Jinping — a meeting where the most sensitive issue in U.S.-China relations has moved to the center of the negotiating table [1]. China is pressing for explicit American concessions on Taiwan, while offering headline-grabbing purchase commitments in return. The question is whether either side can deliver on its promises — and whether the price of a deal is one Washington can legally or strategically afford to pay.

What Beijing Wants on Taiwan

China's demands at the summit extend beyond trade. According to multiple diplomatic sources and public statements, Beijing is pushing for the United States to explicitly state that it "opposes Taiwan independence" — language that would represent a meaningful departure from decades of deliberate ambiguity [2]. At the Biden-Xi summit in 2024, Xi asked Biden to adopt this exact formulation; Biden declined [3].

Beyond rhetoric, China wants material changes. The Trump administration has already delayed up to $14 billion in arms packages to Taiwan — including missiles and missile defense technology — to avoid antagonizing Beijing ahead of the summit [4]. In February 2026, Trump publicly acknowledged consulting Xi about Taiwan arms sales, a departure from longstanding U.S. policy of making such decisions independently [5].

Simultaneously, the administration approved Nvidia's sale of H200 AI chips to China, with a 25% tariff as a condition — drawing bipartisan criticism in Congress [6]. A senior Taiwanese official captured Taipei's anxiety: "What we are most afraid of is to put Taiwan on the menu of the talk between Xi Jinping and President Trump" [7].

The Arms Sales at Stake

U.S. arms sales to Taiwan have fluctuated sharply over the past six years. In December 2025 alone, the Biden administration notified Congress of $11.15 billion in potential sales — the largest single package ever — including 82 HIMARS rocket systems, 60 M109A7 self-propelled howitzers, and Javelin anti-tank missiles [8]. As of late 2025, the total backlog of approved but undelivered U.S. arms to Taiwan stood at approximately $32 billion [9].

Source: Forum on the Arms Trade / NPR

Data as of Dec 18, 2025CSV

The delayed packages under Trump represent a significant portion of this pipeline, and any formal reduction in arms commitments would have direct implications for Taiwan's defense posture against a military that conducts regular exercises simulating a cross-strait invasion.

The Trade Deficit and Tariff Landscape

The economic backdrop to the summit is defined by tariffs. Under the current regime, Chinese goods face effective tariff rates near 30%, with some categories reaching 54% under executive orders signed in early 2026 [10]. These are the highest rates applied to any U.S. trading partner. Before Trump's first-term trade war began in 2018, the average U.S. tariff on Chinese goods was roughly 3% [11].

The U.S. goods trade deficit with China fell to $202.1 billion in 2025 — the smallest in over two decades and down $93.4 billion from prior levels [12]. But this decline has been offset by growing deficits with other countries, particularly in Southeast Asia, as supply chains rerouted through Vietnam, Thailand, and other intermediaries [13]. The overall U.S. trade deficit remained near $900 billion in 2025, essentially unchanged [12].

The Tax Foundation estimates that Trump's 2026 tariff regime amounts to an average tax increase of $700 per U.S. household [14]. The Yale Budget Lab projects that sustained tariffs will increase the unemployment rate by 0.3 percentage points and reduce payroll employment by roughly 550,000 jobs by the end of 2026 [15].

Sector-by-Sector Exposure

The economic damage from a breakdown in negotiations would not fall evenly. According to Tax Foundation and Yale Budget Lab analyses, the sectors most exposed include [14][15]:

• Agriculture: U.S. farm exports to China — particularly soybeans, pork, and cotton — remain vulnerable to retaliatory tariffs. China has repeatedly diverted purchases to Brazilian suppliers when tensions escalate.
• Manufacturing: U.S. manufacturing output has expanded by an estimated 1.2% under tariff protections, but these gains are offset by input cost increases for manufacturers dependent on Chinese components [15].
• Semiconductors: Trump imposed a 25% tariff on semiconductor imports while simultaneously permitting Nvidia to ship chips to China — a policy that has drawn accusations of incoherence from both parties in Congress [6].
• Construction: Output in this sector is projected to contract by 2.4% due to elevated material costs [15].

The IMF has estimated that a universal 10% rise in U.S. tariffs, combined with retaliatory measures from the EU and China, could reduce U.S. GDP by 1% and global GDP by 0.5% through 2026 [16].

The Phase One Precedent

Any assessment of a potential Trump-Xi deal must contend with the record of the last one. The Phase One trade agreement, signed in January 2020, committed China to purchasing an additional $200 billion in U.S. goods and services over 2020 and 2021, above a 2017 baseline [17].

China met only 58% of that target. Total U.S. exports of covered goods and services to China over the two years reached $290.8 billion — well short of the commitments [17]. The shortfalls were concentrated in manufactured goods, where actual purchases were 48% below the target, and energy, where they were 56% below target [17]. The Peterson Institute for International Economics described the deal as having "failed spectacularly" [17].

Source: PIIE

Data as of Feb 8, 2022CSV

Structural issues — including Chinese industrial subsidies, forced technology transfer, and intellectual property theft — were deferred to a "Phase Two" that never materialized [18]. Congressional testimony has noted that enforcement mechanisms were inadequate and that China's agricultural biotech approval process remained a persistent barrier to market access [19].

The Realist Case for Concessions

Not all analysts oppose the idea of Taiwan-related concessions. Scholars associated with the realist school of international relations argue that an unconditional U.S. commitment to arm Taiwan increases the risk of conflict without guaranteeing Taiwan's security.

The Quincy Institute for Responsible Statecraft has argued for "supporting Taiwan without a commitment to war," contending that a more aggressive anti-China posture constitutes a "bad friend policy" that places Taiwan in greater danger by provoking the very military escalation it seeks to deter [20]. Defense Priorities, a Washington think tank, has similarly argued that re-embracing the One China policy and strategic ambiguity, while relying on diplomatic tools to encourage cross-strait engagement, reduces the odds of catastrophic miscalculation [21].

A 2026 CSIS survey found that 77% of China policy experts believe Beijing expects the United States to make at least some concessions on Taiwan, with 24% believing China expects major concessions [22]. The Columbia Journal of International Affairs has warned that Trump's transactional approach risks creating a dynamic where "limited [Chinese] coercion could generate U.S. pressure on Taipei" — not through a single grand bargain, but through incremental erosion [23].

Proponents of the deal argue that a comprehensive economic agreement stabilizing U.S.-China trade could benefit global markets, reduce inflationary pressures from tariffs, and create a framework for managing competition — gains that, they contend, outweigh the costs of modest rhetorical shifts on Taiwan.

Allied Reactions and Treaty Obligations

Any U.S. concession on Taiwan would reverberate across the Indo-Pacific alliance network. Japan's relationship with China has deteriorated sharply following Prime Minister Sanae Takaichi's November remarks that Tokyo could intervene militarily in a Taiwan crisis — a statement Beijing called "blatant interference" [24]. Japan has been acquiring Tomahawk cruise missiles and expanding its definition of "self-defense" to include scenarios involving Taiwan [24].

A U.S.-Japan-South Korea trilateral statement has emphasized the importance of maintaining peace and stability across the Taiwan Strait and opposed "attempts to unilaterally change the status quo" [25]. Any American shift on Taiwan language would undermine this coordinated position.

South Korea has taken a more cautious line, maintaining its one-China policy since 1992 and seeking to balance its massive trade relationship with China against its security alliance with the United States [26]. The EU, while less directly implicated, has seen European analysts describe the Japan-China diplomatic crisis over Taiwan as "spiraling into something structural" [27].

The U.S.-Japan mutual defense treaty (Article V) applies to "territories under the administration of Japan," which includes islands close to Taiwan. Any perceived U.S. retreat on Taiwan could raise questions in Tokyo about the reliability of American security guarantees more broadly — a dynamic that would extend to South Korea, the Philippines, and Australia.

Legal Guardrails on Presidential Action

The president's ability to make Taiwan concessions is constrained by statute. The Taiwan Relations Act of 1979 declares that the United States shall make available to Taiwan "such defense articles and defense services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capacity," with this determination shared between the president and Congress [28].

The Act further requires the president to inform Congress "promptly" of any threats to Taiwan's security and to determine "appropriate action" in accordance with "constitutional processes" — language that legal scholars interpret as requiring congressional consultation before significant policy changes [28].

Additional legislation reinforces these constraints. The Taiwan Travel Act of 2018 encourages high-level official visits between the U.S. and Taiwan [29]. The TAIPEI Act of 2020 directs the executive branch to support Taiwan's international partnerships and strengthen bilateral trade ties [30]. While these laws primarily use "should" rather than "shall," legal analysts note that taken together with the Taiwan Relations Act, they create a normative framework that would make unilateral presidential concessions politically — if not legally — difficult to sustain [30].

Any agreement that effectively curtailed arms sales or altered official U.S. language on Taiwan's status would face immediate congressional scrutiny and possible legislative countermeasures.

The No-Deal Scenario

If the summit produces no substantive agreement — which multiple analysts consider the most likely outcome [31] — the economic consequences would unfold on several fronts.

Sustained tariffs at current levels would continue to impose an estimated 0.3% drag on U.S. GDP before accounting for retaliation [14]. Inflation effects, while modest at the aggregate level, are concentrated in consumer-facing categories: metal products, electronics, and vehicles face the largest price increases [15].

The bond market adds another dimension of risk. China's holdings of U.S. Treasury securities have fallen nearly 50% from their 2013 peak of $1.32 trillion to approximately $683 billion as of November 2025 [32]. Chinese regulators have advised financial institutions to limit further Treasury purchases, citing concentration risk [33]. While a sudden sell-off remains unlikely — it would damage China's own portfolio — the trend of gradual divestiture reduces a key source of demand for U.S. government debt at a time of elevated federal borrowing.

Source: U.S. Treasury Department

Data as of Feb 1, 2026CSV

Some of China's Treasury exposure is believed to be held through custodial centers in Belgium, Luxembourg, and the United Kingdom, meaning official figures may understate the true level of interdependence [32].

The Summit's Real Purpose

Brookings senior fellow Patricia Kim has suggested that the most likely outcome is "a year focused on stability" — a continuation of the current trade truce with China exporting rare earths and purchasing U.S. agricultural products in exchange for partial tariff relief [34]. Trump, she notes, seeks "headline-grabbing pledges of large-scale Chinese purchases" across agriculture, energy, Boeing aircraft, and semiconductors [34].

The risk lies in the details. Even minor shifts in language — such as supporting "peaceful unification" rather than "peaceful resolution" — could meaningfully alter expectations and constrain future U.S. responses to Chinese coercion [34]. Beijing will push for the United States to adopt its preferred diplomatic principles of "mutual respect" and "peaceful coexistence," terms that implicitly require American acceptance of China's "core interests," including its claims over Taiwan [34].

As one expert quoted by Time magazine put it: "Both men can declare victory without sacrificing much of anything" [31]. The danger is that the sacrifices, if they come, will be borne not by the leaders at the table but by the 23 million people of Taiwan — and by the credibility of American commitments across the Pacific.