The world’s two largest economies have been pulled back from the brink as President Donald Trump and Xi Jinping avoided a full-blown trade war.
China and the United States agreed to a “framework” deal that halts 100 percent tariffs threatened by Trump and delays restrictions on Beijing’s rare earth exports, a move that could have crippled global manufacturing.
After weeks of escalating threats, fiery rhetoric and market panic, the development marks a surprising change in tone ahead of the pair’s high-stakes meeting in South Korea later this week.
Treasury Secretary Scott Bessent said in Kuala Lumpur after two days of intense talks: “The president had given me maximum leverage when he threatened 100 percent tariffs if the Chinese imposed their global controls on rare earth exports.
“I think we’ve avoided it, so the tariffs will be avoided.”
China, which controls about 90 percent of global rare earth processing, had been preparing to impose sweeping new export licensing rules that would have come into effect next month.
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Bessent said Beijing would “delay that for a year while they re-examine it.”
The dramatic reduction comes just two weeks after Trump called China’s export controls a “moral shame” and slapped what he called “extraordinarily aggressive” 100 percent tariffs on Beijing in retaliation.
At the time, the president declared he had “no reason” to meet with Xi, but the tone has changed.
Now, both sides are preparing for what could be the most consequential handshake of Trump’s second term.
Jamieson Greer, the US trade representative, said the Kuala Lumpur talks had produced “a framework for a potential trade pact” that would be “ready for leaders to review”.
Chinese negotiator Li Chenggang echoed that sentiment, saying the two sides had “sincere and in-depth discussions” and reached a “preliminary consensus.”
White House officials say Trump and Xi will meet in Seoul on Thursday to seal the deal, which covers tariffs, cooperation on fentanyl, rare earth minerals and a long-awaited decision on the future of TikTok in the United States.
Bessent hinted that a “final deal” on TikTok, a critical point in US-China relations since Trump’s first term, could be announced at the summit.
Trump, en route to Asia, told reporters aboard Air Force One that he was willing to add another unpredictable twist: a meeting with North Korean tyrant Kim Jong-un.
“I would if he got in touch,” she said.
“They have a lot of nuclear weapons but not a lot of phone service.”
He added: “I’m open to it. I had a great relationship with them… If you want to spread the word, I’m open to it.”
The US president landed in Malaysia on Sunday, where he finalized a series of smaller trade deals with Southeast Asian nations including Vietnam, Thailand and Malaysia, deals designed to strengthen the economic tie around China’s regional influence.
He also presided over the signing of a ceasefire between Thailand and Cambodia, proudly declaring it “a momentous day for all the people of Southeast Asia.”
But the real test lies ahead in Seoul.
The standoff comes after months of economic brinkmanship in which Beijing matched Washington’s tariffs in a tit-for-tat spiral.
The trade war peaked at a staggering combined rate of 154 percent earlier this year before an emergency truce in Geneva returned it to manageable levels.
Relations then plummeted again when China abruptly reimposed restrictions on rare earth exports, a move the White House saw as a direct attack on Trump’s technology policies and chip sanctions.
Trump’s furious response on October 10 (the so-called “Liberation Day tariffs”) shook Wall Street, sparking a sell-off and sending the S&P 500 down 2.7 percent in a single day.
Beijing’s retaliation only deepened the standoff, with Chinese officials accusing the United States of weaponizing trade.
Now, after a weekend of frenetic diplomacy, both sides appear to have blinked.
China has reportedly agreed to resume imports of American soybeans, a politically crucial concession after reducing purchases to zero earlier this year.
“Soybean producers will be very happy with this agreement,” Bessent said.
Greer confirmed that both sides also discussed extending tariff truces and rebalancing port fees imposed on Chinese-built or owned ships, another flashpoint in the long-running dispute.
The timing of the deal is politically electrifying.
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Trump arrives in Asia fresh after a fortnight of explosive foreign policy measures: imposing “act of war” sanctions on Putin’s oil giants, excluding Canada from trade negotiations after a “mean” anti-Trump announcement and boasting about “ending eight wars” during his second term.
Now, the self-proclaimed negotiator is poised for what could be his biggest diplomatic victory yet: defusing a global trade time bomb.
