The Busan Framework Agreement between the United States and China, announced following the leaders' summit in South Korea, is a temporary truce in a long and turbulent trade and economic conflict between the world's two largest economic powers. The agreement eases immediate financial and political pressures on both sides by lowering tariffs and suspending some export restrictions, but it does not address the deep roots of tension that have fueled years of ongoing confrontation.
In practice, the agreement provides more breathing room than a real solution. China benefits from regaining some flexibility and control over its strategic resources, while the United States gains temporary political and economic relief as the 2026 midterm elections approach. With both sides still free to interpret and implement the terms of the agreement according to their own interests, it seems almost certain that new disagreements will arise.
The coming year is likely to be governed by a state of "managed stability," with both sides cooperating just enough to avoid collapse, while still seeing each other as strategic competitors. Markets and businesses will experience a temporary lull, but will remain wary of a new wave of escalation, while technological, political and strategic rivalries will remain intact.
What happened?
On October 30, 2025, US President Donald Trump and Chinese President Xi Jinping met in the Korean city of Busan, trying to stop a new spiral of tariffs and trade barriers that had escalated during the year. Both leaders were under considerable domestic pressure: Trump by U.S. farmers and industrialists hurt by the tariffs, and Xi by China's slowing economy and falling exports as a result of tightening U.S. restrictions.
The meeting resulted in an agreement called the Busan Framework, a one-year agreement aimed at de-escalating tensions, which included the following points:
The US agreed to reduce the 20% tariffs on Chinese imports related to fentanyl concerns to 10% and suspend a planned 100% increase on Chinese goods. Washington also halted an investigation into Chinese shipping practices and suspended for a year restrictions on Chinese companies on the U.S. Entity List.
In return, China pledged to resume buying U.S. soybeans and agricultural products, lift new export restrictions on rare minerals for a year, and cooperate with the U.S. in controlling exports of fentanyl manufacturing materials. It also agreed to reopen discussions on the forced sale of TikTok and to consider purchasing U.S. energy products, although these commitments remain vague.
The agreement effectively extended a reciprocal temporary freeze on tariffs that would have expired in November, and was accompanied by the announcement of plans for reciprocal visits in 2026, presented as a diplomatic breakthrough for both sides. However, the agreement came after months of mutual escalation: New US tariffs in February, Chinese restrictions on rare metals in April and October, and additional US export controls over the summer.
The Busan meeting temporarily halted this cycle, but did not address its structural causes.
Background of the conflict
The Busan agreement is part of a long line of fragile truces and recurring tensions between Washington and Beijing. The modern phase of this conflict began in 2018 when the Trump administration imposed massive tariffs on Chinese goods, accusing Beijing of "unfair trade practices" and "forced technology transfer." China responded with retaliatory tariffs targeting sensitive US sectors such as agriculture.
Since then, the confrontation has expanded into areas of investment, export controls, and restrictions on technological cooperation. All previous attempts at appeasement were only temporary respites, as disagreements over technology, industrial policy, and global influence would soon return to trigger new rounds of escalation.
Domestic political factors have been a key driver of this pattern; in Washington, trade tools are used as electoral leverage and a show of strength to the electorate. In Beijing, the priority is economic stability and presenting itself as a "rational" power in a turbulent international environment, without making substantive concessions.
Accordingly, the Busan agreement reflects a very narrow intersection of interests between the two sides, aimed at avoiding immediate damage while avoiding delving into the roots of structural differences.
Basic issues
1. Internal political pressures:
Trump is trying to balance his position between appearing tough on China and protecting American voters from negative economic consequences, especially before the 2026 elections. In contrast, Xi is focused on stabilizing the economy and demonstrating China's resilience without major concessions.
2. Technological competition:
Washington continues to deny Beijing access to advanced technologies such as semiconductors, artificial intelligence and sensitive software in an effort to slow its industrial rise. Beijing is focused on developing domestic alternatives and using rare metals as a counter-pressure card.
3. China's control of critical supply chains:
Rare minerals, essential for electronics, renewable energy, and defense, remain a key leverage tool for China. The agreement did not remove restrictions, only temporarily froze them.
4. Reshaping global supply chains:
Global companies have started moving part of their production out of China to countries like Vietnam, India and Mexico to minimize geopolitical risks, but these networks are still intertwined with the two giants' economies.
5. Ambiguous implementation mechanisms:
The agreement lacks clear verification mechanisms or specific sanctions, giving both sides political flexibility to exploit or repudiate it when needed.
Possible scenarios
1. Basic scenario: "Managed Stability"
A year of relative calm punctuated by some tensions. Parties implement part of the deal's commitments, and the market remains relatively stable. Political rhetoric may escalate as the US elections approach, but economic interests prevent an explosion.
2. Escalation scenario: Renewed trade confrontation
The deal fails, and Washington accuses Beijing of not fulfilling its commitments on fentanyl or agricultural imports. China responds with new restrictions on critical metals. Markets fluctuate wildly, and companies accelerate the relocation of supply chains away from both sides.
3. Cooperation scenario: Gradual stabilization
It is less likely, but possible if the agreement is extended beyond 2026 while establishing channels of dialogue on technology and energy. It could lead to a limited normalization of trade, but it would not end the strategic animosity between the two sides.
Risk factors
Even in the best-case scenario, the global economy will continue to live under constant uncertainty.
Shifting tariffs and trade restrictions will keep companies on their toes, while markets will try to adapt to a new reality where volatility will be the norm rather than the exception.
If the deal collapses, the repercussions would be vast: Inflation in the United States, a decline in China's exports, and turmoil in globally sensitive industries, from defense to green energy. It could also lead to a global economic polarization between a Washington-led axis and a Beijing-led one.
Even in a cooperation scenario, relations will not return to the deep interdependence of pre-2018; both countries are investing heavily in industrial and technological self-sufficiency.
Conclusion
The Busan agreement marks a new phase in U.S.-China relations, based not on resolution or reconciliation, but on managing rivalry.
Instead of restoring stability, both sides are now learning to coexist in controlled tension, making limited concessions in exchange for time, while each prepares for the next round of conflict.
The global economy is having to adapt to a rapidly shifting equilibrium, where disruption is no longer the exception, but the rule.
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