Ahead of Trump-Xi meeting, US to open probe into China’s compliance with 2020 trade deal

Ahead of a meeting between Donald Trump and Xi Jinping, the US Office of the Trade Representative is preparing to launch an investigation into China’s compliance with the US–China trade deal signed in 2020, according to The New York Times.

In 2020, Trump signed the ‘Phase One’ trade deal with China, which required China to purchase an additional $200 billion worth of American goods and services —including natural gas, soybeans, and aeroplanes— above 2017 baseline levels. The deal is widely regarded as one of the biggest failures of Trump’s first term.

The Office of the Trade Representative could initiate the investigation as early as Friday, The Times reported.

An investigation into the 2020 trade deal could heighten tensions ahead of the Trump–Xi meeting. However, Trump may also be seeking to use it as leverage.

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The investigation would be filed under Section 301 of the Trade Act of 1974, which allows the US administration to examine whether the trade practices of other countries are harming American interests, according to The Times.

Such investigations are typically the first step towards imposing tariffs. If ongoing trade talks falter, Trump could use the findings as a pretext to escalate tariffs on China — he has already threatened China with 100 per cent tariffs and cutting China's access to unspecified Western software.

Trump and Xi are scheduled to meet on October 30 in South Korea on the sidelines of the Asia-Pacific Economic Cooperation (APEC) Summit. Ahead of the visit, Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer flew to Malaysia to hold talks with China’s lead negotiator, Vice Premier He Lifeng, on Friday. These discussions are expected to lay the groundwork for the Trump–Xi meeting.

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Ahead of their meeting with He, Greer told CNBC on Wednesday that he and Bessent would “try to see if there’s room to move forward on some of these really difficult issues that have come up due to some new Chinese measures on rare earths”. He described those measures as “incredibly aggressive” and “totally disproportional” to any US action taken so far.

How the 2020 US-China trade deal failed

The US-China Phase One deal is widely considered a spectacular failure.

In a 2023 report to Congress, then-US Trade Representative Katherine Tai stated that China had “fallen far short of implementing its commitments to purchase US goods and services in 2020 and 2021” under the agreement.

“The reality is that this agreement did not meaningfully address the more fundamental concerns that the United States has with China’s state-led, non-market policies and practices and their harmful impact on the US economy, workers, and businesses,” the report stated.

An analysis by the Peterson Institute for International Economics (PIIE) found that China did not purchase a single dollar’s worth of additional goods or services it had committed to under the deal.

“In the end, China bought only 58 per cent of the US exports it had committed to purchase under the agreement — not even enough to reach its import levels from before the trade war. Put differently, China bought none of the additional $200 billion of exports Trump’s deal had promised,” noted Chad P Bown, the Reginald Jones Senior Fellow at PIIE.