The photographs came out exactly as expected. Two men in suits. An enormous hall. Handshakes at a slightly uncomfortable distance. Donald Trump and Xi Jinping met in Beijing this week for what the press has taken to calling the Beans and Boeing Summit, a name that tells you most of what you need to know about the level of ambition going in.
The headline result: Xi agreed to purchase U.S. soybeans, energy, and 200 Boeing jets, a commitment Trump announced via Fox News. Markets were not impressed. Boeing shares fell 4% on Wall Street - the order was 200 jets, well below the 500 planes that Trump had floated before the summit. Nvidia reportedly got approval to sell its H200 chips to major Chinese companies, sending tech stocks higher, and both Boeing CEO Kelly Ortberg and Nvidia CEO Jensen Huang accompanied Trump to Beijing. Beyond that, the two sides agreed to meet again in the autumn.
That is the summit. A partial airplane order, a soybean pledge, and a calendar entry.
What the summit will not fix - and what almost nobody covering it will explain - is the actual problem. The trade war between the United States and China is not a political problem. It is, at its core, an accounting problem. And it cannot be solved by a board of trade, a podium announcement, or a photograph.
How the world got here
To understand the current moment, it helps to go back to basics. Trade, in its simplest form, is an exchange: I sell you something, you sell me something, and we both come out ahead. The British economist David Ricardo formalized this logic in the early 19th century under the principle of comparative advantage - the idea that countries should specialize in what they produce most efficiently, trade for the rest, and everyone benefits.
For most of the 20th century, this is broadly how things worked. Countries ran trade surpluses (selling more than they bought) or trade deficits (buying more than they sold), but the imbalances were generally manageable.
Then something changed. Several large economies - first Japan in the 1970s and 1980s, then Germany, then China on a massive scale after its entry into the World Trade Organization in 2001 - began systematically suppressing domestic consumption to fund industrial growth. The mechanism is what economists call financial repression: low interest rates on household savings, undervalued currencies, weak labor protections, and policies that effectively transfer wealth from ordinary people to manufacturers and the state. Households earn less than they produce. They cannot afford to buy everything the economy makes. So the excess output goes abroad.
China's entry into global markets produced what economists call the China shock - a surge in Chinese exports that displaced manufacturing jobs across the United States and Europe on a scale that took a decade for researchers to fully quantify. In the early 2000s, that surge was accompanied by an equivalent surge in Chinese imports: the country was buying the sophisticated machinery it needed to build its factories. The trade was lopsided, but it was at least two-directional.
Today, that has changed. China is selling, but it is barely buying. Its trade surplus - the gap between what it exports and what it imports - has grown to extraordinary size. The country produces far more than its own citizens can consume, and it has no particular interest in buying from abroad what it believes it can eventually make itself.
This is the world the Beijing summit was trying to navigate.
What is actually happening
The intellectual framework that best explains the current situation comes from Michael Pettis, a finance professor at Peking University and a senior fellow at the Carnegie Endowment for International Peace. Pettis has been making a consistent argument for years: trade surpluses and deficits are not caused by trade policy. They are the automatic consequence of domestic savings and investment decisions.
According to Pettis, nearly half of the excess savings of the world is regularly directed into U.S. financial markets, primarily to take advantage of their depth, liquidity, and governance - not because Americans invited them, but because there is nowhere else for that volume of capital to go.
Here is why that matters. When foreign capital flows into the United States, the U.S. must, by accounting definition, run a corresponding trade deficit - meaning it imports more than it exports. This is not a choice. It is what economists call a balance of payments identity: money flowing in to buy U.S. financial assets has to be offset somewhere in the accounts, and that offset shows up as a trade deficit. As Pettis argues, the U.S. doesn't fund its trade deficit. Surplus countries force it to run one.
The United States becomes what he calls the consumer of last resort for the global economy. Not by design. By arithmetic.
American trade deficits force the U.S. to choose between three outcomes: higher unemployment, more household debt, or greater fiscal deficits. Since no elected politician wants the first option, the U.S. has historically chosen combinations of the second and third. More consumer borrowing. More government spending. More Treasury bonds issued. Which attracts more foreign savings. Which reinforces the dollar's strength. Which makes U.S. exports more expensive. Which widens the trade deficit further. The loop feeds itself.
The 90-day truce currently in effect - which expires in November - was designed to buy time for a negotiated resolution. But Trump arrived in Beijing substantially weaker than he left Washington. In February, the U.S. Supreme Court issued a 6-3 decision striking down the IEEPA tariffs - the ones Trump had been raising and lowering through 2025 - ruling that the emergency powers law did not authorize the president to impose sweeping new tariffs. Trump immediately reached for a different legal authority. The U.S. Court of International Trade subsequently ruled that his use of Section 122 of the Trade Act of 1974 - which allows temporary duties to correct balance of payments deficits - was also unjustified, finding that the U.S. was not experiencing the kind of crisis the law was designed for. A third set of tariffs under Section 301 is in preparation, but those investigations will not be complete until summer.
Trump sat down with Xi Jinping having had his two main negotiating tools stripped away by his own courts, twice.
The money trail
This is the section of the story that the photographs cannot capture.
The problem Pettis identifies is structural, not political. China's government has spent decades making a series of domestic policy choices - suppressing household income, keeping savings rates artificially high, directing capital toward manufacturing - that generate more output than Chinese consumers can absorb. That surplus output has to go somewhere. It goes abroad. The trade surplus is not an intention. It is the arithmetic result of those choices.
The same logic applies to Germany, which runs a persistent current account surplus - the broadest measure of trade in goods, services, and income - that has for years been the largest in the world in absolute terms. Both China and Germany have built their economic models around selling to others. When surplus countries generate excess savings, those savings must be exported, and while economic theory suggests they should flow to developing countries with high investment needs, in practice they mostly end up in advanced countries with the deepest and best-governed financial markets.
The irony is that this arrangement has not been entirely costless for the surplus countries either. China ran enormous surpluses after 2008 and the pressure to reinvest them domestically produced a property bubble that has been deflating for years, with no clear floor in sight. Japan ran huge surpluses in the 1980s, suppressed consumption to fund investment, built spectacular infrastructure, and was widely expected to overtake the United States - until the debt caught up, producing three decades of stagnation that economists now call Japan's lost decades. The pattern is consistent: surplus countries discover, when the music stops, that they needed their customers more than they thought.
On the American side, the fiscal arithmetic is becoming uncomfortable. The U.S. government recently sold 30-year Treasury bonds - long-term government debt - at a 5% yield for the first time since 2007. Financing the national debt is getting meaningfully more expensive. Treasury Secretary Scott Bessent has been funding long-term government obligations with short-term borrowing, a strategy that critics describe as a massive bet that long-term interest rates will fall - a bet that looks increasingly difficult to justify while the government is simultaneously running large deficits, reducing the labor supply through deportations, and conducting a war in the Middle East that has driven up energy prices.
Beijing made its own calculations clear. Xi warned Trump that mishandling Taiwan would put the U.S.-China relationship into great jeopardy - a statement that dominated the early hours of the summit and that U.S. Secretary of State Marco Rubio subsequently tried to downplay. Taiwan was not on the official agenda. It was on the agenda anyway.
China also has its own pressure points. China imports roughly 40% of its oil through the Strait of Hormuz. The American military situation in the Middle East is not merely a U.S. domestic political problem. It is costing China money on every barrel of oil that passes through those waters.
The board of trade announced at the summit - a committee of senior officials from both countries charged with ensuring China follows through on its purchase commitments - is a telling detail. China made similar purchase commitments in the Phase 1 trade deal signed in 2020. It did not follow through. The solution to China not honoring its commitments is a new committee to monitor whether China honors its commitments.
What people are doing about it
Governments and businesses on all sides are making moves, but mostly moves that buy time rather than fix anything structural.
The European Union's trade commissioner has compared Europe's dependency on Chinese minerals to its former reliance on Russian energy, warning that without action, Europe risks losing whole sectors of industry within a couple of years. The EU is simultaneously preparing legislation that would require Chinese companies to hire European workers, buy European components, and transfer technology as the price of market access - which is more or less exactly what China required of Western multinationals a generation ago, and Chinese officials have apparently noticed the resemblance.
American companies are accelerating efforts to reduce exposure to Chinese supply chains in critical materials. The U.S. is trying to build domestic rare earth processing capacity - rare earths being the minerals used in everything from electric vehicle batteries to military hardware, a supply chain China currently dominates and used as leverage during the tariff conflict last year.
China, for its part, is trying to accelerate its semiconductor industry to reduce dependence on Western technology - a project that will take years regardless of what is announced at summits.
Ordinary households on both sides are absorbing the consequences of these macro-level decisions in practical ways. American consumers have been paying higher prices on a wide range of goods as a result of tariffs that have now, in large part, been struck down by courts. The IEEPA tariffs amounted to an average tax increase per U.S. household of $1,000 in 2025 and $1,300 in 2026. Chinese households, meanwhile, continue to save at rates that reflect a fundamental lack of confidence in domestic consumption - a rational response to a social safety net that remains thin and to an economy that has not fully absorbed the collapse of its property sector.
Economists who follow the structural arguments have noted, repeatedly, that the only durable resolution requires China to shift from investment-led growth to consumption-led growth: giving money to households so that Chinese citizens can actually afford to buy what the economy produces. This would mean the state giving up control over capital allocation. It has not happened. There is no particular sign that it is about to.
The bottom line
The Beijing summit produced a partial Boeing order, a soybean pledge, and a photograph. What it did not produce - and could not produce - is any change to the domestic policy choices in China and the United States that are the actual cause of the trade imbalance. China will continue to suppress household consumption to fund manufacturing. The U.S. will continue to absorb the resulting surplus, running larger deficits and issuing more debt. The accounting will continue to do what accounting does, regardless of what anyone announces at a podium. The last time the world tried to resolve a comparable imbalance through coordination, it took the Plaza Accord of 1985 - a rare moment of genuine multilateral cooperation. Before that, the adjustment came through the Great Depression. History suggests the odds favor the harder path.
Timeline
- Early 2000s - China joins the World Trade Organization and its exports surge, initially accompanied by a parallel rise in imports of industrial equipment. The first China shock begins displacing manufacturing jobs across the U.S. and Europe.
- 1980s - Japan runs enormous trade surpluses, suppresses consumption to fund investment, and is widely expected to overtake the U.S. The resulting debt produces three decades of economic stagnation.
- 2008 - China channels its surpluses into massive domestic investment, producing a property boom that later becomes a prolonged bust.
- 2020 - The U.S. and China sign the Phase 1 trade deal, under which China commits to increased purchases of U.S. goods. China does not meet its purchase commitments.
- 2025 - U.S. tariffs on Chinese goods reach 145%. China retaliates with 125% tariffs on U.S. goods and restricts exports of rare earth minerals. A 90-day truce is eventually agreed.
- February 20, 2026 - The U.S. Supreme Court strikes down Trump's IEEPA tariffs in a 6-3 ruling, finding the emergency powers law did not authorize the president to impose sweeping new tariffs.
- May 7, 2026 - The U.S. Court of International Trade rules against Trump's Section 122 tariffs, finding they were not justified by a genuine balance of payments crisis.
- May 14-15, 2026 - Trump and Xi meet in Beijing. China commits to purchasing 200 Boeing jets and U.S. agricultural and energy products. A board of trade is announced to monitor Chinese purchase commitments. The two leaders agree to meet again in autumn.
Summary
Who: U.S. President Donald Trump and Chinese President Xi Jinping, along with business leaders including the CEOs of Boeing and Nvidia.
What: A two-day summit in Beijing produced a Chinese commitment to buy 200 Boeing jets and U.S. agricultural and energy products, alongside the announcement of a joint board of trade to monitor Chinese purchase follow-through. No structural trade reforms were agreed.
When: May 14-15, 2026.
Where: Beijing, China.
Why: Both leaders arrived under domestic economic pressure and with a 90-day trade truce set to expire in November. The summit was designed to stabilize relations and demonstrate progress, but the underlying driver of the trade imbalance - a structural mismatch between China's suppressed domestic consumption and the U.S.'s role as global consumer of last resort - remains unchanged.