Proof.
As the problem is local on X' we may assume that X, X', S, S' are affine schemes. Say S' = \mathop{\mathrm{Spec}}(A'), X' = \mathop{\mathrm{Spec}}(B'), S = \mathop{\mathrm{Spec}}(A), X = \mathop{\mathrm{Spec}}(B) with A = A'/I and B = B'/J for some square zero ideals. Then we obtain the following commutative diagram
\xymatrix{ 0 \ar[r] & J \ar[r] & B' \ar[r] & B \ar[r] & 0 \\ 0 \ar[r] & I \ar[r] \ar[u] & A' \ar[r] \ar[u] & A \ar[r] \ar[u] & 0 }
with exact rows. The canonical map of the lemma is the map
I \otimes _ A B = I \otimes _{A'} B' \longrightarrow J.
The assumption that f is flat signifies that A \to B is flat.
Assume (1). Then A' \to B' is flat and J = IB'. Flatness implies \text{Tor}_1^{A'}(B', A) = 0 (see Algebra, Lemma 10.75.8). This means I \otimes _{A'} B' \to B' is injective (see Algebra, Remark 10.75.9). Hence we see that I \otimes _ A B \to J is an isomorphism.
Assume (2). Then it follows that J = IB', so that X = S \times _{S'} X'. Moreover, we get \text{Tor}_1^{A'}(B', A'/I) = 0 by reversing the implications in the previous paragraph. Hence B' is flat over A' by Algebra, Lemma 10.99.8.
\square
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