Trump, Xi Hit Reset—Trade Thaw Promises More Soybeans, Less Substance

The long-awaited meeting between U.S. President Donald Trump and Chinese President Xi Jinping in South Korea marked the first face-to-face engagement between the two leaders since 2019—an event long anticipated by markets hungry for any sign of de-escalation between the world’s two largest economies. The outcome, while broadly positive, fell short of the more optimistic expectations set by trade bulls. The joint statement emphasized stability and cooperation, with headline agreements on tariff reductions, agricultural purchases, and rare earth exports. Yet, investors were quick to note the lack of enforcement mechanisms or detailed timelines, suggesting this may be more of a “pause” than a pivot in U.S.–China relations. Markets reacted with polite indifference overnight, viewing the deal as directionally constructive but insufficient to materially shift trade or growth trajectories in the near term.

The major takeaways from the Busan summit were clear but modest in scope. Both sides agreed to a 12-month moratorium on escalatory actions, effectively shelving new tariff or export-control measures through 2026. Trump confirmed that the tariff rate on fentanyl-related chemical imports from China will be halved to 10%, lowering the overall average tariff rate on Chinese goods from roughly 57% to 47%. In return, Beijing will cooperate in curbing fentanyl shipments into North America and enhance customs transparency. China also agreed to resume purchases of U.S. agricultural goods, committing to buy 12 million metric tons of soybeans this year and 25 million metric tons annually through 2028, alongside “unspecified quantities” of other farm and energy products. Additionally, the countries pledged to pause port-related shipping fees and to suspend China’s rare earth export restrictions for one year—an important signal to manufacturers reliant on critical minerals.

Treasury Secretary Scott Bessent , speaking with Fox Business this morning, described the summit as “a step in the right direction” and predicted that “a signed trade deal could come as soon as next week.” He emphasized the “mutual respect” shown between Trump and Xi, saying, “This was the first time in years that both sides spoke about economic cooperation rather than retaliation.” Bessent added that Section 301 measures targeting Chinese shipbuilding would be suspended for one year and that the U.S. would “integrate shipbuilding with its allies” to reduce dependency on China. On the agricultural front, he reiterated that soybean purchases were “a major concession that will meaningfully benefit American farmers,” and he called the decision to postpone rare earth restrictions “a win for the global supply chain.” Looking ahead, Bessent said President Trump is expected to name a new Federal Reserve chair before Christmas and voiced optimism about “stronger growth and consumer spending in 2026” supported by tax refunds and trade clarity.

In tone and substance, the summit’s deliverables aligned with pre-meeting expectations. Trump described the session as an “amazing” meeting—a “12 out of 10,” in his words—but conceded that Taiwan, technology exports, and broader security tensions were not discussed in detail. The roughly 90-minute dialogue reportedly focused on trade normalization, drug enforcement, and industrial cooperation. Both leaders agreed to maintain “open lines” on technology, with Trump stating that “Nvidia will be in talks with Chinese officials,” though he clarified that the U.S. “is not talking about the Blackwell chip.” That distinction proved crucial: Nvidia (NVDA) will not receive approval to sell its Blackwell AI chips into China, a decision that was widely expected and consistent with CEO Jensen Huang’s prior guidance that no Chinese sales were included in the company’s outlook. While this limits Nvidia’s addressable market, it avoids disrupting current forecasts and should have minimal near-term financial impact.

The rare earth and tariff agreements offer modest relief to global manufacturers. By suspending the October 9 export controls for 12 months, China signaled a willingness to de-weaponize one of its most powerful trade levers. The U.S. reciprocated by pausing planned “port fee” surcharges on Chinese-built or owned vessels docking in U.S. ports. These steps, while incremental, reduce immediate friction for industries like automotive, aerospace, and defense—sectors where rare earth supply chains are notoriously fragile. The inclusion of energy purchases, with Beijing agreeing to buy U.S. liquefied natural gas and crude oil, further suggests a limited thaw in economic engagement.

Still, the absence of new structural commitments or enforcement mechanisms tempered enthusiasm. No mention was made of semiconductor export policy, data governance, or digital trade—three of the most contentious and economically significant battlegrounds in the U.S.–China relationship. Moreover, while the fentanyl tariff cut carries political significance, it represents a narrow slice of bilateral trade and is unlikely to meaningfully reduce the total tariff burden still applied to over $300 billion in Chinese goods. The decision to defer discussion of technology access—particularly regarding AI chips and cloud services—signals that both sides remain cautious about overlapping national-security red lines.

From a market perspective, the announcement was mildly risk-positive but not game-changing. U.S. equity futures held steady overnight, and the dollar was little changed. The Chinese yuan appreciated slightly, reflecting relief at the symbolic thaw rather than substantive policy change. U.S. industrials and agriculture-linked equities may see a modest boost, though semiconductor names could experience marginal selling pressure given the explicit exclusion of Nvidia’s high-end chip sales. Analysts characterized the summit as “long on optics, short on detail,” a sentiment likely to define its near-term market impact.

For investors, the meeting carries more diplomatic than financial weight. The last time Trump and Xi met—on the sidelines of the 2019 G20—the result was a temporary détente followed by renewed friction months later. This time, the moratorium on escalatory rhetoric at least provides a predictable policy window through next year’s U.S. election season. If followed through with a formal agreement next week, the outcome could modestly support global manufacturing sentiment and reduce tail risks for supply chains. But without concrete enforcement or progress on technology exports, the broader U.S.–China rivalry remains intact.

In short, the Busan summit marks progress—but not peace. The sides have traded confrontation for conversation, tariffs for timelines, and escalation for optics. For now, that’s enough to keep markets calm but not enough to drive them higher. As Treasury Secretary Bessent put it, “It’s not the grand bargain, but it’s a good start.”