Trump and Xi Talk Taiwan as Japan Ratchets Up Tensions

President Donald Trump and Chinese President Xi Jinping met for the first time under Trump’s second presidency in South Korea on Oct. 30. (Andrew Harnik/Getty Images)

Key Points

• Chinese President Xi Jinping and President Donald Trump discussed Taiwan, trade, and Ukraine during a phone call.
• Tensions between Japan and China have escalated over Taiwan, with Japan indicating it would defend itself if Beijing moved to seize the island.
• Taiwan is crucial to the semiconductor supply chain, housing Taiwan Semiconductor Manufacturing, which produces 90% of advanced chips.

President Donald Trump spoke with China’s Xi Jinping in a call that highlighted each side’s priorities for the relationship. It came as tensions are rising over Taiwan, the island democracy Beijing claims as its own, and Trump is pushing to find a way to end the Russia-Ukraine war

Chinese officials were out first with their readout of the Monday conversation, highlighting a discussion about Taiwan, Ukraine, and the U.S.-China relationship more broadly. Nothing was said about soybean purchases, a U.S. priority; state visits; or Chinese access to the most advanced semiconductors.

In a social media post hours later, Trump described a “very good telephone call,” that included discussions about Ukraine, Russia, fentanyl, soybeans, and other farm products. He portrayed it as a follow-up to the meeting in South Korea that produced the latest truce between the two geopolitical rivals.

Trump said that there has been “significant progress on both sides in keeping our agreements current and accurate” since then. He accepted an invitation by Xi to visit Beijing in April and invited Xi to visit the U.S. later in the year.

The Chinese similarly said both sides were “implementing all elements of what we agreed to” during their meeting in South Korea**.**

Analysts have been awaiting details of that truce, which the U.S. has said included Beijing agreeing to buy 12 million metric tons of soybeans by year-end. However, China has bought just 1.5 million metric tons, according to Agriculture Secretary Brooke Rollins.

The call comes amid rising tensions between Japan and China over Taiwan, a geopolitical tripwire. The flare-up between the Asian neighbors was sparked by remarks from newly elected Japanese Prime Minister Sanae Takaichi earlier this month. She said Japan would defend itself if Beijing moved to seize Taiwan.

In a note to clients, Eurasia Group analysts noted that Takaichi used the phrase “situation threatening Japan’s survival,” which would allow the prime minister to deploy the military in self-defense.

“This breaks with Tokyo’s traditional ambiguity on the use of force in the case of invasion, and signals publicly that it would stand with Washington in a crisis – something China considers a direct challenge to its sovereignty. Article V of the US-Japan security treaty obliges the US to defend Japan if it is attacked,” the group noted.

Beijing has threatened to cancel flights and boycott Japanese seafood imports, while Japan is planning to move missiles to an island near Taiwan. “This move is extremely dangerous and should put Japan’s neighboring countries and the international community on high alert,” Mao Ning, China’s Foreign Ministry spokeswoman, said Monday.

In a statement, the Chinese embassy in Washington, D.C., said Xi outlined Beijing’s position on Taiwan to Trump, underscoring that “Taiwan’s return to China is an integral part of the post-war international order. China and the U.S. fought shoulder to shoulder against fascism and militarism. Given what is going on, it is even more important for us to jointly safeguard the victory of WWII.”

Trump said after the meeting in South Korea last month that the two hadn’t discussed the disputed territory.

For Japan, the lack of comment from Trump or a senior official like Secretary of State Marco Rubio is likely unnerving, says David Boling, director of Japan and Asia trade at Eurasia Group. While Boling, formerly a U.S. trade representative working on Japan, doesn’t expect Takaichi to retract her comments, he also doesn’t see further escalation from either side.

“If China turns up the heat too much on Tokyo, then the U.S. will have to say something and that could create potential issues between the U.S. and China, which neither side wants,” he said. “That is a restraining force [in the China-Japan] conflict.”

On X, U.S. Ambassador to Japan George Glass said: “The United States always has the back of our most important ally in the Indo-Pacific.” Glass met on Monday with Japanese Defense Minister Shinjiro Koizumi.

Taiwan is critical to the semiconductor supply chain and home to Taiwan Semiconductor Manufacturing , which produces 90% of advanced chips. A panel that advises Congress on issues related to China last week flagged growing concerns about Beijing’s increased activity around Taiwan and in the Pacific islands.

The embassy said the two leaders also spoke about Ukraine. Xi stressed “China’s support for all efforts that are conducive to peace, and expressed the hope that the various sides would narrow their differences, reach a fair, lasting and binding peace agreement at an early date, and resolve the crisis at its root,” it said.

Neither side mentioned China’s access to more advanced semiconductor chips. But Commerce Secretary Howard Lutnick said in a Bloomberg TV interview that Trump would speak with his advisers about whether the U.S. would allow Nvidia to sell H200 chips to China.

The takeaway for investors is that both sides seem vested in keeping the detente going. “While both sides chose to emphasize different issues, there were no direct contradictions in the two statements,” says Andy Rothman, head of Sinology, a China-focused research firm. “Both leaders continue to speak in positive, constructive terms about the bilateral relationship.”

Write to Reshma Kapadia at reshma.kapadia@barrons.com