Executive Summary: A Framework for Managed Competition
The complex economic conflict between the United States and the People's Republic of China (PRC) has entered a critical phase, characterized by tactical de-escalation preceding deeper strategic bifurcation. High-level discussions conducted in Kuala Lumpur, culminating in the anticipated meeting between President Donald Trump and President Xi Jinping in Gyeongju, South Korea, on Thursday, October 25, 2025, successfully yielded a "substantial framework" for immediate crisis avoidance. This framework, intended for formal “consummation” by the two leaders, achieves a temporary trade truce that averts the immediate crisis involving China's rare earth export restrictions and the US counter-threat of 100% tariffs.
This Gyeongju Framework involves critical mutual concessions, including the expected revival of substantial Chinese purchases of US soybeans and the deferral of China’s rare earth minerals licensing regime by approximately one year.urthermore, the framework successfully finalized the long-negotiated deal to transfer ownership and control of the US version of the TikTok algorithm to a US-based entity, representing a significant technological and national security concession by Beijing.
However, the perceived stability offered by this truce is undermined by several factors, including internal US strategic paradoxes and external operational friction. The administration's $20 billion financial support package to Argentina, intended as a geopolitical countermeasure to Chinese influence, unintentionally furnished Beijing with a massive, discounted supply of soybeans, undercutting US agricultural leverage just prior to the summit. Compounding this complexity, the ongoing partial US government shutdown severely impairs the operational capacity of key agencies—such as the Bureau of Industry and Security (BIS)—which are essential for processing the licenses and adjustments required to implement the technical aspects of the new trade agreemeOverall, the Gyeongju Framework represents a strategic pause, allowing both superpowers time to accelerate internal programs aimed at reducing mutual economic dependence.
I. The Political and Logistical Context of the 2025 Gyeongju Summit
I.i. Geopolitical Imperative: Motivation for a Tactical Truce
The drive toward a framework agreement was necessitated by escalating threats from both sides, signaling a mutual need to stabilize economic expectations. For the United States, the primary objective was securing immediate agricultural sales—which had plummeted to zero—and stabilizing critical supply chains by defusing China’s threat to weaponize its rare earth mineral dominance. Treasury Secretary Scott Bessent confirmed that the discussions had eliminated the threat of 100% tariffs on Chinese imports set to begin November 1, allowing the Trump administration to present the outcome as a successful management of conflict without sacrificing core strategic controls.
For Beijing, securing a pause on the implementation of new, triple-digit tariffs was paramount, alongside seeking continued access to crucial advanced technology components, particularly microchips. The agreement to delay the rare earth threat achieves this aim while preserving the potential for future coercion. This measured approach, where Beijing restricts exports temporarily and then relents, is consistent with the strategic dynamics described by the Folk Theorem in repeated games; the lingering risk of future restrictions motivates competing foreign investment, ultimately tempering China’s long-term market power in the mineral space.
The consistent use of measured diplomatic terminology, such as "substantial framework," "very constructive," and "preliminary consensus" , immediately prior to the leaders' summit suggests the talks were meticulously structured to manage market expectations and halt immediate escalation. This tactical retreat serves a deeper strategic function: it buys both nations necessary time to quietly accelerate their respective programs toward economic self-reliance. China continues doubling down on semiconductor independence, while the US accelerates domestic rare earth refining capabilities.
I.ii. The Impact of US Government Dysfunction on Implementation
Any anticipated gains from the Gyeongju framework face immediate execution risks due to the partial US government shutdown that began on October 1, 2025, after federal funding lapsed for numerous government agencies. This operational impairment directly affects the agencies responsible for the technical implementation of the trade framework.
The Bureau of Industry and Security (BIS), housed within the Department of Commerce, is responsible for processing export license applications, including those necessary for agricultural sales or the potential licensing of modified semiconductor chips. During a shutdown, BIS is expected to suspend regular services, such as processing export license applications and advisory opinions, except in circumstances deemed essential to national security. Although enforcement activities are expected to continue, the significant delays in securing new export licenses or determinations introduce bureaucratic friction into the execution of diplomatic agreements.
Furthermore, the United States International Trade Commission (USITC), which handles trade investigations relevant to the overall conflict (such as Section 301 and Section 232 investigations), has ceased regular operation While essential websites and data systems remain accessible, document filing has been disabled, and hearings must be rescheduled. This slowing of stakeholder responsiveness and processing of trade reviews creates administrative friction. The practical implication is that a successful trade agreement requiring specific administrative actions—like tariff reduction implementation or new license approvals—is hampered because the responsible agencies cannot operate at full capacity. This operational lag could quickly be perceived by Beijing as a failure of the US to deliver on its diplomatic promises, eroding trust and creating opportunities for non-compliance.
I.iii. Global Crises: Leverage or Distraction?
The Gyeongju summit is set against a challenging global backdrop that includes the ongoing Russia-Ukraine war, the fragile ceasefire brokered between Israel and Hamas (affecting Gaza and the West Bank), and intensified nuclear tensions with Iran following the September reimposition of pre-2015 UN sanctions.
The US focus remains strongly centered on maintaining the Middle East ceasefire and addressing the conflicts in Europe. The US administration has successfully utilized military and diplomatic pressure against Hamas and its principal sponsor, Iran, weakening Tehran through targeted operations against its nuclear facilities and its proxies, Hezbollah and the Houthis. Simultaneously, China's geopolitical calculus is complicated by its deepening partnership with Russia, which opposes the West's actions, particularly regarding the activation of the Iran nuclear deal’s “snapback” sanctions.
Crucially, however, the economic negotiations resulting in the Gyeongju framework do not formally link trade concessions (soybeans, rare earths) to China’s policy alignment on Ukraine, Gaza, or Iran. While these crises provide the broader context for US-China strategic competition, the explicit linkage sought by the US in the trade talks is centered on managing the flow of chemicals used to make fentanyl, a domestic security issue. The strategic competition is defined by these global issues, but the immediate economic truce is built on localized concessions, allowing both sides to compartmentalize the most intractable geopolitical disputes.
II. Trade Leverage Dynamics: The Soybean Strategy and Financial Blowback
II.i. The Agricultural Standoff and China’s Substitution Strategy
The US agricultural sector remains deeply embedded in the crossfire of the trade war. The escalating tensions culminated in China completely halting US soybean imports in September 2025, marking the first time in seven years that US shipments fell to zero just as the crucial autumn harvest commenced. Analysts estimate US farmers stand to lose approximately $5.7 billion in soybean exports to China through October 2025 relative to historical averages, with the threat of far greater losses if sales remain stagnant during the peak harvesting months.
China successfully countered the loss of US supply by activating its substitution strategy, primarily relying on South American suppliers. Chinese overall soybean imports remained at elevated levels, purchasing 12.87 million metric tons in September. Brazilian shipments rose 29.9% year-on-year, accounting for 85.2% of China's total imports, while Argentina's deliveries surged by 91.5%. Chinese buyers front-loaded purchases from Brazil due to market uncertainty, leading Brazilian exports to exceed historical averages by 10.7% per month since the beginning of the year. Beijing is now confirmed to be leveraging this agricultural supply security as a bargaining chip. The Kuala Lumpur framework acknowledges this by necessitating the resumption of substantial US agricultural purchases by China as a precondition for tariff de-escalation.
II.ii. The Argentine Paradox: Unintended Consequences of Financial Geopolitics
A significant disruption to US trade leverage emerged from the US administration's own financial maneuvers in Latin America. Treasury Secretary Scott Bessent confirmed the US signed a $20 billion "economic stabilization agreement" with Argentina's central bank, utilizing the Exchange Stabilization Swap Line. This massive rescue package was designed to prop up the Argentine peso, stabilize the government of ally President Javier Milei, and serve as a strategic counter to China’s financial expansion in the region. It is notable that Argentina also concurrently renewed its separate $5 billion currency swap line with China.
The US intervention resulted in an immediate, self-inflicted strategic blow. To increase foreign currency inflow and stabilize the peso, the Argentine government temporarily removed export tariffs on many agricultural goods. This action flooded the international commodities market with competitively priced Argentine soybeans. Leaked communications reveal that Agriculture Secretary Rolland expressed concern to Secretary Bessent that this move reduced global soy prices and provided China with significant leverage.
China seized the opportunity, immediately snapping up approximately 7 million tonnes from Argentine suppliers in a single week. This action exacerbated losses for US farmers and secured Chinese agricultural needs in the short term, ensuring China had sufficient supply resilience to maintain its zero-imports stance during the peak of the US harvest season. The intended geopolitical goal—countering China's influence—was directly undermined by the economic reality, wherein the US financial aid effectively subsidized China's trade war resilience against US domestic interests.
The Argentine Paradox: Geopolitical Intent vs. Economic Reality
| Policy Action | Intended US Geopolitical Goal | Mechanism for Chinese Benefit | Unintended Economic Consequence (US) |
$20 Billion Exchange Stabilization Swap Line to Argentina (Oct 2025) | Stabilize US political ally (Milei); Counter China's financial influence in Latin America. | Argentine removal of grain export tariffs to gain foreign currency. China snaps up discounted volume. | Plunge in global soy prices; Further losses for US soybean farmers already facing zero exports ; Increased Chinese leverage in trade talks. |
II.iii. Crisis Averted: Rare Earths and the 100% Tariff Threat
The recent escalation cycle placed both nations on the brink of significant economic damage. China had announced restrictions on rare earth minerals and magnets exports, prompting the US counter-threat of imposing 100% tariffs on a substantial portion of Chinese imports starting November .
The Kuala Lumpur discussions successfully averted this immediate threshold. Treasury Secretary Bessent confirmed that the threat of the 100% tariffs has been eliminated. Furthermore, he anticipates that China will delay implementation of its rare earth minerals and magnets licensing regime by one year while the policy is reconsidered.
This immediate pause indicates that both parties recognized the catastrophic potential of full economic escalation and usd these high-stakes threats primarily as bargaining chips to force a tactical de-escalation. However, the analysis of repeated threats reveals that the damage has already been done. The explicit threat of Chinese export controls has galvanized the US administration to launch countermeasures modeled on "Operation Warp Speed". The US is marshalling a whole-of-government effort, including signing deals with allies like Australia and domestic companies like MP Materials, to expand mining, processing, and manufacturing activities necessary to secure a self-reliant rare earth supply chain. Therefore, while the diplomatic truce is welcomed, the underlying strategic determination to reduce dependence on China’s mineral supply chain remains robust.
III. Governing the Digital Battlefield: The TikTok Deal and Algorithm Control
III.i. Finalizing the Madrid Agreement on TikTok
One of the most significant national security outcomes of the recent diplomatic activity is the finalization of the deal regarding the US version of the TikTok platform. The framework, initially agreed upon in Madrid, has had "all the details ironed out" and is scheduled for the two leaders to "consummate that transaction on Thursday in Korea".
The deal is framed as a "qualified divestiture" mandated by the US Congress in April 2024 to address national security concerns related to content manipulation by a foreign power. The finalized structure requires the creation of a U.S.-based joint venture, where a majority of American investors and owners will hold stakes, and the board of directors will be primarily composed of Americans. ByteDance and its affiliates are restricted to owning less than 20% of the new entity. Reports indicate potential US investors include conservative media owners, suggesting an effort to align the platform’s control structure with domestic political interests.
III.ii. Transferring Algorithmic Power: The Critical Concession
The most critical component of the agreement involves the transfer of control over the platform’s core recommendation mechanism—the "For You Page" algorithm. The terms stipulate that the US will receive control of the algorithm, which will subsequently be "retrained and continuously monitored" by US entities to ensure content is "free from any outside manipulation". This monitoring process is expected to be overseen by technology partners such as Oracle.
China’s agreement to relinquish control and permit the retraining of the algorithm is a substantial national security concession. It effectively establishes a powerful precedent for information technology control equivalent to implementing export controls on sensitive hardware. By securing control over the algorithm's continuous function and its training data, the US successfully mitigates the perceived national security threat that the application could be utilized by a foreign government for political influence or data exfiltration. This move fundamentally reframes the digital sphere as a key asset subject to sovereign oversight, irrespective of ByteDance’s minority ownership.
III.iii. Implications for US Users and the Creator Economy
The transition to a U.S.-controlled algorithm is a complex logistical undertaking that will introduce significant risk and volatility for users and the creator economy. The executive order formalization and initial code review begin in Q4 2025. The crucial phase of algorithm retraining, during which the system learns new engagement patterns exclusively from U.S. data, is scheduled to commence in Q1 2026, with the full transition anticipated by Q2 2026.
During this period, all stakeholders should expect significant disruption. Content performance benchmarks are expected to become volatile, as historical data will no longer reliably predict success under the retrained system. The underlying discovery mechanics—how engagement patterns, hashtags, and viral signals function—will be recalibrated. This disruption extends to the creator economy; influencers who previously thrived under ByteDance’s system may experience fluctuating visibility and will be forced to "test aggressively" to identify the platform’s new content distribution logic. Business accounts will also need to reassess paid advertising strategies if organic reach dramatically dips during the transition.
Furthermore, there is an expectation among industry observers that existing users may be required to transition to a new, separate U.S.-specific application. The overall success of the national security victory is contingent upon whether the current massive user base is willing to migrate and accept the subsequent content volatility, as, without the users, the algorithm's value diminishes. Therefore, while securing algorithmic control is a major strategic win, the actual implementation carries high execution risk. The US government must manage this transition carefully to ensure the newly acquired asset retains its commercial viability and network effects.
IV. The Strategic Bifurcation in Advanced Technology
IV.i. The Unwavering Red Line on Semiconductors
Despite the overarching goal of de-escalation in the Gyeongju framework, the foundational US policy regarding advanced semiconductors remains strategically rigid and rooted in national security. Semiconductors are recognized as fundamental building blocks for crucial technologies like Artificial Intelligence (AI) and are essential for future economic competitiveness and global leadership. The US policy, enforced through the Bureau of Industry and Security (BIS), continues to restrict the PRC’s ability to produce advanced chips and curtail Chinese access to computing and AI applications, driven by concerns over military-civil fusion.
IV.ii. Negotiation on Export Controls: Tactical Licensing, Not Strategic Relaxation
The anticipated "relaxation of mutual export controls" promised in the Gyeongju framework is highly constrained concerning advanced chip technology. US policy avoids strategic relaxation in favor of highly managed, tactical licensing of modified components.
The pattern of BIS actions in 2025 demonstrates this tightly controlled environmen After initially controlling Nvidia’s H20 chip (a modified version designed for the Chinese market) in May 2025, BIS granted an export license for H20 sales in July 2025. This licensing allows US firms to maintain some market presence while enforcing technical limitations. However, concurrent actions reveal China’s unwillingness to accept permanently constrained technology: US consultations with Nvidia regarding newer chips (B30 and B40) were immediately followed by the Cybersecurity Administrator of China (CAC) effectively "blacklisting" the B40 (or RTX Pro 6000D) in September 2025.
This rejection of de-tuned chips signals that Beijing is not simply submitting to US controls but is actively prioritizing technological independence.China is doubling down on deeply subsidized domestic development efforts, pushing its local industries to close the technological gap. This strategic response means that any semiconductor "relaxation" announced in Gyeongju will be minor and technical, while the deeper trend toward technological bifurcation—accelerated by Beijing’s own commitment to self-reliance—will persist unabated.
IV.iii. US Counter-Measures in Rare Earths
The one-year rare earth truce achieved through the Gyeongju Framework does not alter the US commitment to structurally addressing China’s mineral dominance. The US administration is actively applying the "Operation Warp Speed" model to the rare earths sector. This approach requires a coordinated, whole-of-government effort to establish clear, predetermined targets and market incentives designed to rapidly scale non-Chinese production.
The strategy involves deploying a robust toolkit, including equity investment, lending, purchase guarantees, and price insurance mechanisms. Concrete steps have already been taken, such as the deal signed by President Trump with the Australian prime minister and an agreement with MP Materials to expand domestic mining, processing, and magnet manufacturing capabilities.The fact that the US continues to deploy high-urgency initiatives, coupled with fresh Pentagon investment in refining capabilities , confirms that Washington views the truce as purely tactical. The commitment to building self-reliant supply chains suggests that the weaponization of rare earths is now treated as a persistent threat requiring long-term structural mitigation rather than simple diplomatic negotiation.
V. Strategic Outlook: Assessing the Framework for Managed Decoupling
V.i. Evaluating the Gyeongju Framework: Gains and Losses
The Gyeongju Framework, derived from the Kuala Lumpur talks, represents a calculated diplomatic success in managing immediate economic instability but fails to reverse the fundamental trend of strategic competition.
The primary short-term gain is the successful avoidance of a destructive tariff escalation (the 100% tariff threat) and the securing of a one-year pause on China's most powerful counter-measure, the rare earth export cut-off. A significant national security victory was achieved by compelling China to divest TikTok ownership and surrender control over the algorithm, thereby setting a defining precedent for digital sovereignty. On the trade front, the anticipated resumption of substantial US soybean purchases offers immediate, necessary relief to US farmers.
However, these gains are counterbalanced by strategic losses. The US financial aid to Argentina, intended to counter Chinese geopolitical influence, inadvertently provided Beijing with cheap, secure agricultural supply, significantly weakening the US negotiating position on soybeans—a clear instance of domestic interests being sacrificed for an ill-coordinated geopolitical maneuver. Moreover, the operational friction caused by the US government shutdown introduces significant risk into the execution phase, potentially delaying necessary licensing actions by BIS and the implementation of tariff relief mechanisms.
V.ii. Forecasting Sectoral Resilience
The outlook across key sectors reflects a transition from dependency management to accelerated bifurcation:
Agricultural Outlook: While the framework secures short-term sales, the structural damage caused by China’s substitution strategy remains. The South American supply chain demonstrated its capacity to meet China’s needs in the face of US tariffs. Future US soybean exports will face sustained, high-level competition, particularly as the Argentine market becomes more efficient due to US financial stabilization.
Rare Earths Outlook: The one-year pause provides a critical window for US and allied investment in domestic processing to mature. The US remains committed to the "Operation Warp Speed" model. This sustained effort ensures that China’s future leverage in the rare earth sector will diminish structurally, regardless of the temporary truce.
Technology Outlook: The strategic containment of advanced AI chips will continue, regardless of the trade truce.The pattern of tactical licensing, met by China’s outright rejection of de-tuned chips, suggests that the détente will simply be used by Beijing to accelerate domestic funding for its technological self-reliance goals, confirming that strategic decoupling in this sector is now largely irreversible.
V. Conclusions and Recommendations
The Gyeongju Framework successfully de-escalates the immediate threats that had pushed the US-China economic relationship toward an uncontrolled collapse. The framework achieves tactical stability through conditional concessions on tariffs, soybeans, and rare earths, while yielding a key strategic victory in securing digital sovereignty over the TikTok platform.
However, the analysis demonstrates that this stability is fragile and tactical, masking an underlying acceleration of strategic decoupling across technology and supply chains. The US administration must recognize the inherent risks of managing this complex relationship.
Recommendations for Managed Competition
Mitigate Financial Blowback and Inter-Agency Policy Alignment: The administration must immediately implement an inter-agency vetting and modeling process for major financial interventions, particularly those involving the Exchange Stabilization Swap Line. This process must explicitly model the potential unintended consequences of foreign financial aid on sensitive, tariff-exposed US domestic industries—such as agriculture—to prevent future instances where geopolitical strategy undermines domestic economic interests.
Expedite Implementation Post-Shutdown: Given the operational delays inherent in the US government shutdown, the administration must ensure that funding resolution for key trade enforcement and licensing agencies (such as BIS and USITC) is prioritized. Rapid processing of licenses and determinations is crucial to realizing the economic benefits of the Gyeongju truce and preventing administrative friction from becoming a source of renewed commercial instability.
Manage Digital Transition Risk: To solidify the national security victory over TikTok, the administration and its partners must proactively manage the high execution risk associated with the algorithm transfer and potential user migration. Clear, transparent communication regarding the content volatility anticipated during the Q1-Q2 2026 retraining phase, along with a smooth, well-supported process for user transition to the new U.S.-specific application, is essential to ensure that the newly acquired platform maintains its value and market appeal.
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