US-China Trade Talks Yield Progress Amid Tariff Truce

In a pivotal shift from recent escalations, top US and Chinese trade envoys have forged preliminary consensus on thorny issues, priming leaders Donald Trump and Xi Jinping for a landmark summit. Held amid the Association of Southeast Asian Nations gathering in Kuala Lumpur, these talks addressed export restrictions, the fentanyl crisis and maritime fees, averting a plunge back into full-scale economic confrontation. This development, reported on 26 October 2025, underscores a mutual desire to stabilise bilateral ties that underpin global commerce.

At the heart of the discussions were measures to defuse tariff threats and restore critical supply lines. US Treasury Secretary Scott Bessent revealed that the president's proposed 100% duties on Chinese imports are "effectively off the table," a concession tied to Beijing's commitment to "substantial" soybean purchases. This is no small matter for US agriculture: China's retaliatory tariffs in March had frozen out American beans, which fetched $13 billion last year – over 20% of the crop used for feed and oil. Resuming these flows could inject vital revenue into rural heartlands, bolstering farm incomes and commodity prices while easing inflationary pressures on global food supplies. Complementing this, negotiators tackled rare earth elements, vital for advanced manufacturing. China, which dominates production, agreed to delay sweeping export controls for a year to "reexamine" them, following US insistence on unchanged restrictions against Beijing. As Trade Representative Jamieson Greer stated, "Staving off China’s rare-earth restrictions is one of the major objectives of these talks, and I think we’re progressing toward that goal very well." This deferral safeguards uninterrupted access to materials essential for semiconductors, electric vehicles and aerospace, potentially averting cost surges that have plagued tech firms amid prior curbs. Broader consensus extended to fentanyl precursor controls – where the US may ease a 20% tariff in exchange for stricter Chinese enforcement – and shipping levies, resolving tit-for-tat port fees that hiked logistics costs. Chinese envoy Li Chenggang described the talks as "intense" but productive, emphasising that "a stable China-US trade and economic relationship is good for both countries and the rest of the world." These steps not only extend the existing tariff truce but also open doors to resolving TikTok's US operations and even coordinating on global challenges like Russia's Ukraine invasion.

The negotiations' success could ripple through capital markets, fostering a more predictable environment after months of policy whiplash. Equity indices sensitive to trade flows, such as those tracking US tech giants reliant on Asian supply chains, stand to benefit from reduced uncertainty. Soybean futures may see upward pressure as export volumes rebound, while rare earth-dependent sectors like renewables and defence could dodge margin erosion from material shortages. Trump himself projected optimism, telling reporters: "They want to make a deal, and we want to make a deal," hinting at follow-up summits in both capitals. Yet, markets remain vigilant for the fine print at the Thursday Trump-Xi meeting. Will the deal truly encompass a "complete" overhaul, including Taiwan sensitivities and agricultural quotas? Historical precedents suggest implementation hurdles, but the preliminary thaw marks a welcome pivot from brinkmanship. For investors, this underscores the interplay of geopolitics and economics: a durable pact could underpin sustained growth in cross-border trade, now valued at trillions annually, while faltering progress risks renewed volatility. As Southeast Asian frameworks diversify US trade away from China – evident in Trump's concurrent pacts – the summit outcome will calibrate global risk appetites. Bessent's telegraphed "wide-ranging agreement" hints at encompassing peace initiatives, potentially broadening the deal's strategic footprint. In essence, these talks exemplify how leader-level diplomacy can recalibrate economic fault lines, offering a blueprint for managing superpower frictions in an interconnected world.