Trade War Monitor, Sept. 22: Fragile Optimism as TikTok Deal Takes Shape - Caixin Global

A high-stakes phone call between Chinese President Xi Jinping and U.S. President Donald Trump on Friday has cracked open the door to a potential compromise on TikTok, injecting a rare dose of optimism into the deeply fraught U.S.-China relationship.
Both leaders signaled progress, with negotiators in Madrid reportedly reaching a basic framework for the embattled app. The deal is drawing in some of America’s biggest names, with Trump suggesting media tycoon Rupert Murdoch and his son Lachlan may be involved, alongside tech titans Larry Ellison and Michael Dell. Xi stated that Beijing respects a business solution based on market rules and Chinese law, a carefully worded statement that appears to give the complex negotiations a path forward.
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A high-stakes phone call between Chinese President Xi Jinping and newly inaugurated U.S. President Donald Trump on Friday has injected rare optimism into the tense U.S.-China relationship, specifically regarding the embattled social media app TikTok. Both leaders signaled that negotiators in Madrid had achieved a basic framework for a potential deal on TikTok, suggesting progress toward compromise. The possible agreement involves several prominent U.S. figures, including media tycoon Rupert Murdoch and his son Lachlan, as well as technology magnates Larry Ellison and Michael Dell. While Xi emphasized China’s support for business solutions based on market rules and compliance with Chinese law, Trump reiterated America’s intention to promote trade cooperation and facilitate balanced negotiations between the countries. This concerted diplomatic push opens the door for resolving the TikTok dilemma and easing broader bilateral tensions.[para. 1][para. 2][para. 7][para. 8][para. 9][para. 10][para. 11][para. 12][para. 13][para. 14]
Despite this positive movement, new frictions have arisen. Chinese regulators have escalated their antitrust efforts by investigating Nvidia’s 2020 acquisition of Mellanox Technologies, claiming breaches of conditions attached to the original $6.9 billion deal. The State Administration for Market Regulation (SAMR) stated it would proceed with further inquiry into the matter, potentially resulting in significant financial penalties for Nvidia. This event coincides with a separate cybersecurity review of Nvidia’s H20 AI chips and demonstrates Beijing’s increasing willingness to leverage regulatory tools amid the ongoing trade war.[para. 3][para. 15][para. 16][para. 17][para. 18][para. 19]
Meanwhile, the United States has called upon G7 and NATO allies to increase tariffs on China in response to Chinese purchases of Russian oil—an escalation China has vowed to vigorously counter. Both China’s foreign ministry and commerce ministry called the U.S. tariff push unfair and stressed the necessity of dialogue and negotiation as the only viable solution to the Ukraine crisis, should China’s legitimate interests be threatened.[para. 4][para. 20][para. 21]
The situation exemplifies how delicate and multifaceted the global trade environment has become. Commenting at the Asia New Vision Forum 2025 in Singapore, former U.S. Treasury Secretary Lawrence Summers underlined the urgency for both countries to recognize each other's “red lines” and pursue “strategic reassurance” to prevent an escalation into open conflict. He warned that aggression in areas such as cyber, export controls, and trade policy could significantly increase the risk of confrontation. Summers urged cooperation in climate change and artificial intelligence as crucial areas to manage unavoidable economic interdependence.[para. 5][para. 23][para. 24][para. 25][para. 26]
Economically, the impact of the trade war remains complex. Despite pressures from tariffs, immigration policy shifts, and government layoffs in early 2025, U.S. listed companies recorded robust earnings growth above 9% in the first half of the year, underpinned by a weaker dollar and a surge in AI investment. The resilience of S&P 500 earnings has been sustained by temporary cost advantages, capital expenditure incentives, and moderating labor prices. Looking forward, these factors are expected to continue supporting U.S. corporate profitability, underscoring the paradoxical nature of economic fallout amid ongoing strategic rivalry.[para. 6][para. 27][para. 28][para. 29]
Overall, while the potential TikTok resolution marks a positive step, the ongoing U.S.-China power competition continues to generate fresh challenges even as both countries navigate an era of mutual economic dependence and geopolitical risks.[para. 1][para. 2][para. 3][para. 4][para. 5][para. 6]
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