Kuala Lumpur: On Sunday, the top trade negotiators from the US and China claimed they had struck a preliminary agreement on a number of areas that had been causing problems. This was a big step toward a bigger trade deal between the two greatest economies in the world. The development makes it possible for US President Donald Trump and Chinese President Xi Jinping to reach a deal that may calm down global markets that have been shaken by months of tariff threats and export curbs.
Chinese officials said that both sides agreed on export limits, fentanyl management, and shipping fees after two days of high-level discussions in Malaysia. Scott Bessent, the US Treasury Secretary, said CBS News that Trump’s threat to put 100% tariffs on Chinese imports “is effectively off the table.” He said this because China is anticipated to buy “substantial” amounts of soybeans and delay its rare earth export curbs.
Bessent added, “So I would expect that the threat of the 100% has gone away, as has the threat of the Chinese starting a worldwide export control regime right away.” He told ABC News that China is likely to put off its rare-earth limits for a year while it looks over its policies again.
A Broad Agreement on the Horizon
Bessent said that the next accord between Trump and Xi might include an extension of the present tariff ceasefire, a settlement to the TikTok ownership dispute, and a promise that rare earth magnets will keep pouring in, which are important for industries like semiconductors and jet engines.
After Trump said he wanted Xi’s help in ending Russia’s war in Ukraine, the presidents of the US and China are also likely to talk about a strategy for world peace.
The confidence is a big change from the past few weeks, when China’s revelation of new export limits and Trump’s threats of tariffs made many worry about a full-blown trade war.
Markets Respond Well
The progress had a quick effect on the financial markets. The Australian and New Zealand dollars, which are risk-sensitive currencies, rose versus the US dollar. The Swiss franc and Japanese yen, which are safe-haven assets, fell somewhat. Bitcoin’s rise continued for the fourth day in a row.
“One of the main goals of these talks is to stop China’s restrictions on rare earths, and I think we’re making good progress toward that goal,” said US Trade Representative Jamieson Greer on Fox News Sunday.
President Trump, addressing on the sidelines of the ASEAN conference in Kuala Lumpur, said he was sure a deal will be reached. “They want to make a deal, and we want to make a deal,” he added. He also suggested that more discussions between leaders might happen soon in both Beijing and Washington.
Agreement on Fentanyl and Shipping Costs
Li Chenggang, China’s trade ambassador, said that the two countries had come to an agreement on fentanyl, a synthetic opioid that is killing people in the US. The deal might lead to the US lowering or getting rid of a 20% tax that was put in place to get Beijing to stop exporting chemicals that are used to make drugs.
Li claimed that both sides also agreed to deal with the US-imposed port service fees on Chinese ships, which had led Beijing to respond by charging US-operated and flagged ships.
Li said the meetings were “intense” but productive, and he praised the progress that had been achieved, even though the US negotiators were strong. He stated, “We don’t want to see these kinds of problems and changes right now.” He went on to say that a stable trade relationship between China and the US is important for both countries and the world.
What it means for US farmers and trade in rare earths
Earlier this year, China’s retaliatory tariffs stopped US soybean shipments, which hurt American farmers, a group of voters that Trump needs to win. In 2024, China bought $13 billion worth of soybeans, which is more than 20% of the US crop, to use as animal feed and cooking oil.
The rare-earth conflict is probably the most important part of the talks. China, which makes the most things in the world, had cut back on exports earlier when the US put more limits on Chinese tech companies. A short cease-fire allowed some trade to resume, but last month Beijing tightened export restrictions again, raising fears of supply chain problems.
Top officials led talks at Merdeka 118.
Trump was at the ASEAN meeting nearby while the talks were going on at Merdeka 118, one of the tallest structures in Southeast Asia. He Lifeng, China’s senior economic official, and Liao Min, China’s vice finance minister, led the Chinese mission. Jamieson Greer, the US trade representative, was on the US team.
The impending Trump–Xi summit, which will be their first meeting in person since Trump took office again, is anticipated to focus on tariffs, export limits, agricultural trade, fentanyl, and geopolitical concerns like those in Taiwan and Ukraine.
“We’ll talk about a lot of things,” Trump remarked. “I think we have a very good chance of making a deal that covers a lot of ground.”