{"id":27651,"date":"2026-05-15T18:21:59","date_gmt":"2026-05-15T18:21:59","guid":{"rendered":"https:\/\/www.rbc.com\/en\/?post_type=rbc_tl&#038;p=27651"},"modified":"2026-05-15T19:03:32","modified_gmt":"2026-05-15T19:03:32","slug":"where-the-u-s-and-china-go-from-here","status":"publish","type":"rbc_tl","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/the-trade-zone\/where-the-u-s-and-china-go-from-here\/","title":{"rendered":"Trade Zone:\u00a0Where the U.S. and China go from here"},"content":{"rendered":"\n<p><strong>Also in this edition<\/strong>:&nbsp;Should farmland&nbsp;be used to produce food or fuel?&nbsp;And four&nbsp;potential&nbsp;routes&nbsp;for Canada\u2019s embattled auto industry.&nbsp;<\/p>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<h2 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-70752a9edc008c1d0b6bdcbbdc897cc3\" id=\"h-a-summit-about-managed-competition\">A summit about managed competition<\/h2>\n\n\n\n<p>The summit between President Donald Trump and President Xi Jinping in Beijing produced no breakthrough agreements, but that may have been beside the point. After a year in which tariffs between the two countries exceeded 100% and trade flows sharply contracted, the immediate&nbsp;objective&nbsp;on both sides appears to have been stabilization&nbsp;versus&nbsp;resolution.&nbsp;<\/p>\n\n\n\n<p>The atmospherics mattered. Trump described the talks as producing \u201cfantastic trade deals,\u201d while Beijing emphasized \u201ccommon understandings\u201d and continuity. But beneath the optics, the summit revealed where the real negotiations and constraints now sit.&nbsp;&nbsp;<\/p>\n\n\n\n<p>A few themes stood out:&nbsp;<\/p>\n\n\n\n<p><strong>The trade relationship is structurally smaller than it was<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>U.S. imports of Chinese goods and the bilateral trade deficit are now at&nbsp;roughly 20-year&nbsp;lows. Washington\u2019s efforts to reduce exposure to China through tariffs, supply chain diversification, and industrial policy have had a measurable effect. The relationship is no longer defined by integration.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>There was no material progress on tariffs or the Section 301 trade investigations targeting China over state-subsidized production overcapacity in sectors like steel, and&nbsp;electric vehicles.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>China\u2019s priority is predictability<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>The Chinese spent the years between Trump\u2019s first and second terms doing their homework,&nbsp;preparing counteractive policies for more U.S. trade confrontation. Export controls on rare earths and critical minerals, industrial policy tools, and tighter supply chain leverage have proven key weapons in China\u2019s arsenal.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>But the summit reinforced that Beijing\u2019s near-term priority is a more predictable operating environment with Washington\u2014one that reduces the risk of escalation and preserves access to key export markets, technology inputs, and capital flows.&nbsp;&nbsp;<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>No major progress on chips and export controls<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Global semiconductor stocks slid with no major chip deals announced and continued stagnation over the sale of Nvidia\u2019s H200 chips to China.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>This&nbsp;remains&nbsp;the clearest dividing line in the trading relationship. Washington still sees leading-edge chips and export controls&nbsp;as a way to&nbsp;mitigate China\u2019s access to advanced semiconductors that could be used for military applications or AI innovations. Beijing, in turn,&nbsp;hasn\u2019t&nbsp;formally approved shipments of the chips and has looked inward, urging Chinese firms to switch to domestic hardware.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>Agricultural purchases are a U.S. political priority<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>The clearest deliverables, as is often the case in trade negotiations with China, may&nbsp;ultimately come&nbsp;in agriculture. U.S. Trade Representative Jamieson Greer said Washington expects China to commit to \u201cdouble-digit billions\u201d in annual purchases of U.S. agricultural products over the next three years, including soybeans, poultry, and pork.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The White House needs to be seen as supporting U.S. farmers, especially as the impacts of the Iran war on fertilizer prices and other agricultural inputs&nbsp;rise&nbsp;ahead of the mid-terms and as planting season gets underway.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>Both sides&nbsp;appear to want&nbsp;guardrails<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Discussions around a possible \u201cboard of trade,\u201d investment mechanisms, and even preliminary AI guardrails show neither Washington nor Beijing currently wants uncontrolled escalation.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The strategic rivalry continues, but both sides appear increasingly focused on managing it rather than intensifying it in the near term.&nbsp;<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p>&#8212;<strong>Thomas Ashcroft<\/strong>, Global Issues Policy Lead&nbsp;<\/p>\n<\/div>\n<\/section>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<h2 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-0b16dd10ed2d462763f266a373660af8\" id=\"h-food-or-fuel-nbsp\">Food or fuel?&nbsp;<\/h2>\n\n\n\n<p>Skyrocketing&nbsp;oil and gas prices and supply constraints&nbsp;are pushing&nbsp;countries&nbsp;to boost&nbsp;biofuel&nbsp;production and use.&nbsp;The&nbsp;shift&nbsp;aims&nbsp;to&nbsp;curtail reliance on Middle East oil and gas&nbsp;supplies.&nbsp;But&nbsp;the surge in&nbsp;policy-driven biofuel demand&nbsp;coincides&nbsp;with&nbsp;the&nbsp;rising&nbsp;food affordability crisis&nbsp;reviving&nbsp;a&nbsp;recurring&nbsp;debate: should farmland&nbsp;be&nbsp;used&nbsp;to&nbsp;produce&nbsp;food or fuel?&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-the-biofuel-boom\">The biofuel boom:<\/h3>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>The U.S.\u2019s Environmental Protection Agency&nbsp;<\/strong>set record Renewable Volume Obligations (RVOs)&nbsp;for 2026\u20132027&nbsp;with&nbsp;notable increases for&nbsp;biomass-based diesel, produced primarily from soybean&nbsp;and&nbsp;canola oil in North&nbsp;America. In addition, the U.S. House&nbsp;passed legislation this week&nbsp;to&nbsp;allow nationwide&nbsp;year\u2011round&nbsp;sales of gasoline&nbsp;containing&nbsp;15%&nbsp;\u200bethanol (labelled as&nbsp;E15), which is&nbsp;largely produced&nbsp;from corn in the U.S.&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>The<\/strong>&nbsp;<strong>European Commission<\/strong>&nbsp;proposed the&nbsp;<a href=\"https:\/\/energy.ec.europa.eu\/strategy\/accelerateeu-strengthen-eu-energy-resilience_en\" data-dig-id=\"LP-27651-84165e9a\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"AccelerateEU strategy\" class=\"rbc-link-format\">AccelerateEU strategy<\/a>&nbsp;in April, which includes measures to boost EU sustainable biofuel production and use. This proposal is a rapid response to the&nbsp;bloc&nbsp;spending an&nbsp;additional&nbsp;\u20ac24 billion on fossil fuel imports within the first&nbsp;50 days&nbsp;of the Iran conflict.&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Indonesia&nbsp;<\/strong>revived its plans to introduce a higher biofuel blend in 2026 following rising fossil fuel import costs. The blending rate mandate&nbsp;\u200bfor biodiesel made from palm oil is planned to move to 50% from 40% this year.&nbsp;&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Brazil&nbsp;<\/strong>is actively accelerating its biofuel blending mandates to enhance energy sovereignty. President Luiz In\u00e1cio Lula da Silva announced in April that the ethanol blend mandate will be raised to\u202f32% (E32) in gasoline this spring. For biodiesel,&nbsp;<a href=\"https:\/\/www.reuters.com\/business\/energy\/brazil-start-tests-diesel-blend-containing-20-biofuel-may-2026-04-23\/\" data-dig-id=\"LP-27651-9024cd1e\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"testing is underway\" class=\"rbc-link-format\">testing is underway<\/a>&nbsp;to understand the viability for moving the blending rate from 15% to 20%.<strong>&nbsp;<\/strong>&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>India&nbsp;<\/strong>reached its E20 ethanol blending goal&nbsp;in April. Disruptions to the country\u2019s oil and gas prices and supply are prompting&nbsp;discussions&nbsp;on&nbsp;ramping up to&nbsp;E85 or E100 as production capacity&nbsp;expands.&nbsp;&nbsp;&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Vietnam&nbsp;<\/strong>expedited&nbsp;its&nbsp;national mandate for 10% ethanol blends in gasoline to begin in April due to energy shocks in price and supply.&nbsp;Ethanol&nbsp;is produced mostly from&nbsp;cassava,&nbsp;sugarcane, and increasingly corn&nbsp;in the Southeast&nbsp;Asian nation.&nbsp;&nbsp;&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>&#8230;and&nbsp;Canada?&nbsp;<\/strong>In response to the&nbsp;previous&nbsp;shock&nbsp;to Canada\u2019s biofuel supply chains from&nbsp;U.S. trade tensions, the federal government announced a $370&nbsp;million&nbsp;Biofuel Production Incentive and committed to&nbsp;amending&nbsp;the Clean Fuel Regulation to prioritize domestic low-carbon fuel production.&nbsp;These measures, while not in response to Iran war,&nbsp;are intended&nbsp;to&nbsp;increase&nbsp;the resilience of the domestic biofuel sector.&nbsp;&nbsp;<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>Bottomline:<\/strong>&nbsp;The global biofuel market is&nbsp;poised to&nbsp;enter&nbsp;another&nbsp;expansion cycle as countries raise blending mandates to meet energy security&nbsp;and transition to lower greenhouse gas emitting energy sources. However, early signs of rising corn, sugarcane,&nbsp;and vegetable prices may further pressure food prices this year.&nbsp;&nbsp;<\/p>\n\n\n\n<p>&#8212;<strong>Lisa Ashton<\/strong>, Agriculture Policy Lead&nbsp;<\/p>\n<\/div>\n<\/section>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<h2 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-051fa3fa1b23b2c350874f657741550d\" id=\"h-road-test-nbsp\">Road Test&nbsp;<\/h2>\n\n\n\n<p>About&nbsp;200&nbsp;auto&nbsp;sector executives&nbsp;packed into&nbsp;a hotel ballroom this week for the&nbsp;Toronto Region Board of Trade\u2019s&nbsp;Ontario Auto Forum.&nbsp;Magna CEO&nbsp;Swamy&nbsp;Kotagiri&nbsp;laid out three distinct&nbsp;options&nbsp;for dealing with&nbsp;the&nbsp;industry\u2019s&nbsp;headwinds:&nbsp;protect jobs, chase affordability,&nbsp;or build resilience through anchoring&nbsp;the&nbsp;industry in capabilities that&nbsp;can\u2019t&nbsp;easily be replicated.&nbsp;The latter, he said,&nbsp;should be&nbsp;the&nbsp;priority.&nbsp;&nbsp;<\/p>\n\n\n\n<p>RBC Thought Leadership\u2019s&nbsp;Managing Director<strong>&nbsp;<\/strong>Jordan Brennan&nbsp;also took to the stage,&nbsp;presenting&nbsp;findings from&nbsp;his latest report&nbsp;<strong><em>Steering Through Uncertainty<\/em><\/strong>, which charts four&nbsp;distinct&nbsp;paths for the&nbsp;embattled auto industry.&nbsp;&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"549\" width=\"1024\" src=\"https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/05\/Auto-Report-Charts-Expansion-phases-1.png?quality=80&amp;w=1024\" alt=\"Canada's auto sector lost productive capacity during expansion phases\" class=\"wp-image-27686\" srcset=\"https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/05\/Auto-Report-Charts-Expansion-phases-1.png 4000w, https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/05\/Auto-Report-Charts-Expansion-phases-1.png?resize=300,161 300w, https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/05\/Auto-Report-Charts-Expansion-phases-1.png?resize=768,411 768w, https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/05\/Auto-Report-Charts-Expansion-phases-1.png?resize=1024,549 1024w, https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/05\/Auto-Report-Charts-Expansion-phases-1.png?resize=1536,823 1536w, https:\/\/www.rbc.com\/en\/wp-content\/uploads\/sites\/4\/2026\/05\/Auto-Report-Charts-Expansion-phases-1.png?resize=2048,1097 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>Read the full report, including the&nbsp;five&nbsp;strategic considerations&nbsp;that cut&nbsp;across all four scenarios,&nbsp;<a href=\"https:\/\/www.rbc.com\/en\/thought-leadership\/the-growth-project\/steering-through-uncertainty-four-future-paths-for-canadas-auto-industry\/\" data-dig-id=\"LP-27651-352e66e2\" data-dig-label=\"here\" data-dig-action=\"link click\" data-dig-category=\"LP\" class=\"rbc-link-format\">here<\/a>.&nbsp;&nbsp;<\/p>\n<\/div>\n<\/section>\n\n\n\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<h2 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-c4061bf85fb31467cb376b7bacddfabd\" id=\"h-the-week-that-was-nbsp-nbsp\">The week that was&nbsp;&nbsp;<\/h2>\n\n\n\n<p><strong>USTR&nbsp;<a href=\"https:\/\/insidetrade.com\/daily-news\/deputy-ustr-goettman-ustr-eyes-unified-north-american-steel-tariffs\" data-dig-id=\"LP-27651-d9dd8b37\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"pushes\" class=\"rbc-link-format\">pushes<\/a>&nbsp;for \u201cFortress North America\u201d steel protections under USMCA<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Deputy U.S. Trade Representative Jeffrey Goettman said an updated USMCA should include \u201cunified tariff borders\u201d for sectors like steel, aluminum, and autos to prevent products made with non-North American inputs from entering through Canada or Mexico.&nbsp;U.S. steel executives backed tighter \u201cmelt-and-pour\u201d origin rules.&nbsp;<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>EU&nbsp;<a href=\"https:\/\/www.ft.com\/content\/7e24058a-1697-4c36-9939-eb426117850c?syn-25a6b1a6=1\" data-dig-id=\"LP-27651-e47c4ae6\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"sanctions\" class=\"rbc-link-format\">sanctions<\/a>&nbsp;on Chinese chip supplier raise fears of automotive disruption<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Industry executives warned&nbsp;EU sanctions of Chinese chipmaker Yangzhou&nbsp;Yangjie&nbsp;Electronic Technology,&nbsp;for allegedly supplying military technology to Russia,&nbsp;could trigger renewed chip shortages across the auto sector.&nbsp;Some firms&nbsp;are&nbsp;already seeking exemptions as manufacturers&nbsp;remain&nbsp;vulnerable following last year\u2019s rare earth and semiconductor disruptions.&nbsp;&nbsp;&nbsp;<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>EDC&nbsp;<a href=\"https:\/\/www.newswire.ca\/news-releases\/edc-facilitated-135-billion-in-trade-related-activities-and-supported-24-000-businesses-829446081.html\" data-dig-id=\"LP-27651-2b54176f\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"expands\" class=\"rbc-link-format\">expands<\/a>&nbsp;focus on diversification, defence, and strategic sectors<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Export Development Canada announced it&nbsp;facilitated&nbsp;$135 billion&nbsp;in trade-related activity in 2025, supported&nbsp;nearly 24,000&nbsp;businesses, launched&nbsp;new programs,&nbsp;while expanding its European and Indo-Pacific presence.&nbsp;<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p><strong>Bank of Canada research&nbsp;<a href=\"https:\/\/www.bankofcanada.ca\/2026\/05\/sparks-at-bank-article-2026-12\/\" data-dig-id=\"LP-27651-338d159f\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"highlights\" class=\"rbc-link-format\">highlights<\/a>&nbsp;declining maritime connectivity<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Canadian ports became less central to global shipping networks between 2016 and 2023, with declining direct connectivity and lower shipping capacity&nbsp;relative&nbsp;to major Asian hubs.&nbsp;The risk, writes the BoC, is&nbsp;\u201cgreater exposure to supply chain disruptions that could increase the cost of doing business.\u201d&nbsp;&nbsp;<\/p>\n<\/li>\n<\/ul>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Plus: Should farmland be used to produce food or fuel?<\/p>\n","protected":false},"author":89,"featured_media":27674,"parent":0,"menu_order":0,"template":"","meta":{"_acf_changed":false,"disable_focal_point":true,"featured_image_focal_point":{"x":0.5,"y":0.5},"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","footnotes":""},"rbc_tl_category":[207],"rbc_tl_tag":[],"class_list":["post-27651","rbc_tl","type-rbc_tl","status-publish","has-post-thumbnail","hentry","rbc_tl_category-the-trade-zone"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Trade Zone:\u00a0Where the U.S. and China 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