KUALA LUMPUR: The Asia-Pacific Economic Cooperation (APEC) summit this year could witness a long-awaited turning point in global trade.
For months, relations between Washington and Beijing have been defined by tariffs, technology bans, and tit-for-tat restrictions.
Yet behind the public rhetoric, quiet diplomacy and pragmatic economics have started converging. The signs now point towards a breakthrough — not necessarily a grand bargain, but a crucial step towards stability based on goodwill generated in Kuala Lumpur and subsequently US President Donald Trump‘s trip to Tokyo, both of which have made him extremely ebullient, especially when the US stock market is doing well.
The Moment of Pragmatism
Both the United States and China have learned that economic confrontation comes at a price neither can afford. Trump‘s tariff escalation in early 2025 rattled investors and disrupted regional supply chains, while China‘s countermeasures on rare-earth exports created uncertainty for advanced manufacturing worldwide.
Today, both sides face slowing growth, high inflation, and restless markets. The US needs to ease tariff shocks ahead of its midterm elections; China needs steady export demand to support post-pandemic recovery. These parallel pressures have created the space for compromise — and APEC, hosted under South Korea‘s Gyeongju-Seoul framework, offers the ideal platform for that détente.
The Signs Are Clear
Several pre-summit developments suggest that momentum is real. China’s recent decision not to impose new restrictions on rare-earth exports — a move welcomed by Washington — was the first gesture of goodwill. Meanwhile, Malaysia’s success in brokering calm trade dialogue during the Asean Summit in Kuala Lumpur has carried over, setting the diplomatic tone for Asia-Pacific negotiations.
Washington’s economic delegation, led by Treasury Secretary Scott Bressent, has also been in active contact with China’s Vice Premier He Lifeng, paving the way for a meeting between Trump and Chinese President Xi Jinping.
Reports from both parties indicate that the two leaders have already approved a draft framework that freezes further tariff increases for one year while reopening select technology trade channels under stricter compliance rules.
If endorsed at APEC, this framework would effectively pause the spiral of economic retaliation and restore predictability to a global economy weary of shocks.
The Stakes for the World
A breakthrough would reverberate far beyond Washington and Beijing. Global growth in 2025 has slowed to its weakest since the pandemic’s peak, and much of that drag comes from trade fragmentation. A reduction in tariffs and an easing of export restrictions would lift investor confidence across Asia and the Americas alike.
In Southeast Asia, supply chains are already adapting to a “China + 1” model, with Malaysia, Vietnam, and Indonesia capturing major investments. A US–China truce would stabilise that trend rather than freeze it. Firms could plan longer-term manufacturing transitions without fearing sudden policy reversals. For Asean, the dividends of calm are immense — steady exports, inflows of technology, and a stronger voice in shaping the Indo-Pacific economy.
Europe, too, would benefit from a return to smoother trade flows in microchips, green technologies, and logistics. After two years of tariff crossfire that diverted supply chains and inflated prices, a ceasefire would ease global inflationary pressure and restore confidence in open markets.
The APEC Advantage
Why APEC? Because it allows both superpowers to reset relations under a multilateral banner without appearing to yield politically. APEC’s consensus model offers diplomatic cover: neither Washington nor Beijing must admit defeat; both can claim to be upholding regional prosperity.
Moreover, APEC’s composition — 21 economies spanning 60 per cent of world GDP — ensures that any statement on tariff relaxation or technology cooperation immediately carries systemic weight. It would give global markets something they crave most: predictability.
Malaysia and Asean’s Quiet Role
Behind this progress lies a quieter but significant regional influence. Malaysia’s 2025 Asean Chairmanship successfully created the environment for constructive dialogue between the US and China. The Kuala Lumpur Summit paved the way for Malaysia to secure its own zero-tariff deal with Washington, while simultaneously maintaining close trade and investment ties with Beijing.
That experience has not gone unnoticed. In APEC, Malaysia and Asean act as the moral anchor — reminding major powers that trade cooperation must remain inclusive, sustainable, and development-oriented. In this sense, a US–China breakthrough is also an Asean victory: proof that neutral, bridge-building diplomacy still works in a fractured world.
What to Expect
If all goes as planned, three outcomes are likely at APEC:
1. A one-year tariff freeze covering key sectors, including semiconductors, electric vehicles, and consumer electronics.
2. Reactivation of joint trade councils between Washington and Beijing to review digital-trade standards and industrial-subsidy transparency.
3. A shared declaration recognising that supply-chain decoupling must be managed, not deepened, to safeguard global growth.
None of these steps will erase structural rivalries — over artificial intelligence (AI), intellectual property, or global technology governance — but they would mark the first coordinated trade de-escalation in nearly a decade.
A Realistic Optimism
Sceptics argue that Trump’s mercurial style and Xi’s political constraints make any lasting peace improbable. Yet the essence of diplomacy lies not in trust, but in calculated reciprocity. Both leaders understand that confrontation without end risks recession at home and instability abroad.
The APEC Summit thus presents not an endgame, but a necessary intermission — a pause for both economies to recalibrate and for the world to exhale. The coming weeks will show whether pragmatism can triumph over pride.
If it does, 2025 may be remembered as the year when economic realism briefly overruled political rivalry — when APEC, often dismissed as ceremonial, proved that dialogue still matters.
© New Straits Times Press (M) Bhd
