Late Wednesday night (Thursday morning in Korea), President Trump and President Xi greeted each other on the sidelines of the APEC Summit for their long anticipated in-person trade meeting. The working meeting lasted 90 minutes and concluded with both leaders signing off on a one-year trade agreement. The details of the agreement were negotiated in Malaysia over the weekend and finalized by the respective trade teams just a few hours prior to the one-on-one between the leaders.
The White House has not yet released an official framework of the deal, but key details have emerged based on President Trump’s Truth Social post later that evening, interviews conducted by Treasury Secretary Bessent and USTR Greer yesterday, and statements from CCP officials and Chinese media. Secretary Bessent is hopeful that the agreement will be formally signed by both presidents “possibly as soon as next week.”
Importantly, the agreement should be viewed as a longer-term trade truce. The details cover one-year worth of commitments by each side, with the exception of the agricultural purchasing agreement which has a three-year tail.
Below represents what we know thus far, most of which is consistent with what we have previously outlined.
Rare Earths. One-year pause on China’s new export license regime for rare earths and Chinese-produced derivatives.
Commerce 50 Percent Rule. Suspended for one year in exchange for a one year pause in the aforementioned rare earth licensing regime.
Ag Purchases. Chinese committed to an immediate purchase of 12 metric tons of soybeans during “this season” (i.e., between now and January). Chinese further committed to a minimum of 25 metric tons per year for the following three years. Secretary Bessent noted that President Trump may call on President Xi from time to time to purchase more. In addition, Secretary Bessent highlighted commitments totaling 19 metric tons (presumably per year) from new markets.
Fentanyl. Tariffs are reduced from 20 percent to 10 percent with a Chinese commitment to reduce shipments of precursor chemicals to Canada and Mexico. This effectively reduces the effective tariff rate on China to 47 percent.
Section 301. U.S. investigation of Chinese shipbuilding is suspended for one year. Meanwhile, the finalized Korean and Japanese investment deals will help augment U.S. shipbuilding. Less clear are the details of port fees. The U.S. fees went into effect on October 14, with the Chinese following suit in retaliation. A softening of these fees appears to be a part of the deal, though more detail is needed.
TikTok. According to Secretary Bessent, a finalized agreement for the divestment of TikTok was reached in Malaysia and “will go forward.” The Chinese represented that they have reached internal approval for the sale under the U.S. terms, presumably ceding control of the algorithm for U.S. users. No timeline was given, though Secretary Bessent alluded to the coming “months.”
Russian Oil. China proactively expressed interest in U.S. oil and LNG purchases via an Alaskan pipeline agreement that was previously reached with Japan and Korea. Unclear at this time is the fate of U.S. secondary sanctions on Russia and the application to those countries that continue to purchase (e.g., China, India). President Trump said the two sides will attempt to “get something done” to end the war between Russia and Ukraine.
Inbound Investments. The CCP has long dangled investments in the U.S. as a carrot in negotiations. Given U.S. politics and national security concerns, this is not seen as an attractive enticement by the American side. Nonetheless, President Trump expressed openness to allowing Chinese investment access to CATL and other U.S. battery firms and manufacturers.
Enforcement. Formal working groups will be established by each side to meeting on a roughly bi-monthly basis in order to monitor progress on the deal and key metrics.
De-Escalation. All other threatened measures will be rescinded and/or paused for one year, including U.S. software export restrictions, possibly port fees, and the 100 percent tariffs threatened for November 1.
Not Included. No discussion appears to have been had over allowing the shipment of Nvidia’s advanced Blackwell chip to Chinese firms nor any changes in U.S. policy towards Taiwan.
OUTLOOK/ANALYSIS. Again, this week’s agreement should be viewed as one-year reprieve from the US/China trade war escalation. Ultimately, each side achieved its objective, with the US securing a large-scale purchasing agreement and the renewed flow of rare earths. The Chinese, for their part, secured reduced tariffs-particularly with respect to fentanyl-allowing it to again compete on pricing with other large export nations.
The agreement, however, does not solve the overall condition: a race between two superpowers for a dominant world order defined by AI and the various supply chain components (e.g., energy, semiconductors, shipbuilding, software, steel, rare earths). Both sides want to control their own destinies and not be reliant on the other for critical components, including those outside the AI race (e.g., medicines).
Should the agreement progress as planned, high-profile China-related policies currently being considered by Congress are likely to be removed or watered down from the NDAA at the Administration’s request, including the BIOSECURE Act, GAIN Act, and Senator Cornyn’s Outbound Investment language (FIGHT China Act).
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