U.S.-China Seal Preliminary Trade Deal Ahead of Trump-Xi Summit
Trump-Xi summit to finalize rare earths, fentanyl deal.
Negotiators from the United States and China concluded two days of intensive talks in Kuala Lumpur Sunday, establishing a comprehensive preliminary agreement on key trade disputes to be finalized by Presidents Donald Trump and Xi Jinping at their upcoming summit. The framework addresses export controls, fentanyl precursor chemicals, shipping levies, and agricultural purchases, significantly reducing the risk of renewed trade escalation between the world’s two largest economies.
US Treasury Secretary Scott Bessent confirmed that the threatened 100% tariffs on Chinese imports have been withdrawn from consideration. In return, China committed to substantial soybean procurement—estimated at $15 billion annually—restoring access to a market that accounted for over 20% of US production before retaliatory measures in March. Beijing also agreed to defer expanded rare earth export restrictions for one year, ensuring continued supply of critical materials essential for semiconductors, defense systems, and electric vehicles. The US maintained its existing technology export controls targeting strategic Chinese firms.
Chinese Vice Commerce Minister Li Chenggang described the discussions as rigorous yet constructive, noting consensus on fentanyl cooperation that could lead to the reduction or removal of a 20% US tariff imposed to curb precursor flows. Both sides resolved disputes over port service fees on Chinese vessels and reciprocal levies on US-flagged ships, measures that had increased trans-Pacific shipping costs by up to 25%. The agreement includes provisions to secure TikTok operations under US oversight and establishes joint mechanisms to monitor compliance.
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Financial markets responded positively. The Australian and New Zealand dollars appreciated 1.2% against the US dollar, while safe-haven currencies such the Japanese yen and Swiss franc declined. Bitcoin extended gains to $68,500, and US equity futures indicated a strong open, with industrial and agricultural stocks leading. Soybean futures rose 15 cents to $10.45 per bushel, providing relief to American farmers impacted by prior export disruptions.
President Trump, attending the ASEAN summit nearby, stated that a broad and balanced agreement is within reach and confirmed plans for direct talks with President Xi on Thursday during the APEC meeting in South Korea. The leaders are expected to address not only trade but also geopolitical issues, including potential Chinese mediation in the Russia-Ukraine conflict. The Malaysia accord marks a pivotal de-escalation following months of reciprocal restrictions, with enforcement details now critical to long-term stability.
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