US President Donald Trump has reached an agreement with Chinese President Xi Jinping to reduce tariffs on Chinese imports following a significant meeting in Busan, South Korea. This decision comes amid discussions aimed at addressing the illicit fentanyl trade, resuming US soybean purchases, and ensuring the continued export of rare earths from China. The meeting, which marks the first in-person talks between the two leaders since 2019, took place during the Asia-Pacific Economic Cooperation (APEC) summit.
Trump described the meeting as “amazing,” ranking it a “12 out of 10” during a post-meeting press conference aboard Air Force One. He announced plans to cut tariffs on Chinese imports from 57 percent to 47 percent, specifically halving the tariffs on fentanyl precursor drugs from 20 percent to 10 percent. This reduction is contingent upon China taking robust action to halt the flow of fentanyl, a synthetic opioid that has significantly contributed to overdose deaths in the United States.
The announcement had an immediate impact on global markets, with fluctuations observed in major Asian indexes and European futures. The Shanghai Composite Index declined from a ten-year high, while US soybean futures experienced a dip. Prior to the meeting, stock markets had been buoyed by hopes of a resolution to the trade war between the two largest economies, which has disrupted supply chains and affected global business confidence.
The nearly two-hour discussion between Trump and Xi emphasized the need for cooperation despite ongoing economic and geopolitical tensions. Xi acknowledged through a translator the inevitability of occasional frictions between superpowers, while asserting that both nations had reached a “fundamental consensus” on addressing each other’s primary concerns.
In addition to reducing fentanyl tariffs, China has been advocating for eased export controls on sensitive US technologies and a rollback of new port fees on Chinese vessels. While Trump did not make any immediate commitments regarding US concessions, he indicated that China would begin purchasing “tremendous amounts” of US soybeans and agricultural products immediately.
Trade agreements established prior to this meeting are set to expire on November 10, 2023, and include provisions aimed at lowering retaliatory tariffs on US goods and resuming the flow of rare earth magnets from China. Nonetheless, China has recently tightened its controls on rare earth exports, critical materials used in various industries, including automotive and defense sectors.
While the recent talks have led to optimism, it remains unclear how long this newfound cooperation will endure, given the complexities of US-China relations. Trump emphasized during his trip that they would not impose the recently expanded rare earth controls, a statement that echoes the commitment to maintaining open trade channels.
In summary, the agreement between Trump and Xi represents a significant step in easing tensions between the two nations, with potential implications for global trade dynamics. The outcome of these negotiations will be closely monitored as both countries navigate their intricate economic relationship.
