U.S.-China Trade Truce Stabilizes Global Markets, Averts Tariff Escalation

China and the United States have reached a preliminary trade framework to avert a 100% tariff hike on Chinese goods and defer contentious rare earth export controls, according to U.S. Treasury Secretary Scott Bessent, as reported by The Economic Times. The agreement, announced ahead of a scheduled meeting between President Donald Trump and Chinese President Xi Jinping, marks a significant de-escalation in their trade tensions and aims to stabilize a fragile economic relationship.

The framework, described as "very substantial" by Bessent, includes China delaying its expanded licensing regime for rare earth minerals by a year while revisiting the policy, TradingView reported. This move averts Trump's November 1 threat of tariffs, which had been triggered by Beijing's plans to restrict exports of critical materials used in technology and defense industries. The U.S. delegation, including Trade Representative Jamieson Greer, negotiated the deal during high-level talks in Kuala Lumpur with Chinese Vice Premier He Lifeng and trade negotiator Li Chenggang, according to Barron's.

The agreement also includes commitments from China to resume substantial U.S. soybean purchases, a key demand for American farmers, and address fentanyl-related supply chains fueling the U.S. opioid crisis, according to Cryptopolitan. Bessent emphasized that the framework provides a foundation for Trump and Xi to finalize terms during their upcoming meeting in South Korea. "We have a done deal on rare earths, AI, and trade," Bessent stated, noting that the U.S. would leverage Trump's tariff threat to secure concessions, as Cryptopolitan reported.

Chinese officials, however, have remained cautious, offering no specifics on the agreement's scope. Li Chenggang confirmed preliminary consensus on extending the existing trade truce, which expires November 10, and moving forward on fentanyl and export control discussions, The Economic Times reported. The outcome of these negotiations is critical for global markets, as the U.S.-China trade relationship remains a cornerstone of international economic stability.

Analysts suggest the deal reflects both sides' urgency to avoid further disruptions. ING economists anticipate a positive outcome from the talks, citing a "cooling of rhetoric" and Trump's public optimism about a "fantastic deal," according to the Times of India. Meanwhile, the deferral of rare earth export controls eases immediate supply chain concerns for industries reliant on these materials, including semiconductors and renewable energy sectors.

The framework also opens the door for future cooperation on artificial intelligence, with Bessent hinting at discussions involving U.S. tech firms like Nvidia, a point covered by Cryptopolitan. However, broader geopolitical issues—such as Taiwan and the case of jailed Hong Kong media tycoon Jimmy Lai—remain unresolved and could complicate the relationship.

Trump and Xi are set to meet in South Korea on Thursday, with further talks planned in China and the U.S. in early 2026, Cryptopolitan noted. The success of this framework will depend on their ability to translate these preliminary agreements into enforceable policies. For now, the pause in tariffs and rare earth tensions offers a reprieve for businesses and investors navigating one of the most consequential trade dynamics in the global economy.