US-China Trade Tensions Ease: A Tentative Pact on Rare Earths and Tariffs Awaits Trump-Xi Summit
US-China Trade Tensions Ease: A Tentative Pact on Rare Earths and Tariffs Awaits Trump-Xi Summit
In the high-stakes chess game of global commerce, where economic giants spar over markets and resources, a rare moment of calm is emerging between the United States and China. As of October 27, 2025, discreet talks on the sidelines of the ASEAN Summit in Kuala Lumpur have produced a draft agreement to halt spiraling tariffs and loosen China’s grip on rare earth minerals—two pressure points that have edged the world toward a trade war. This fragile deal now hinges on a critical meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, South Korea, set for October 30. If finalized, it could reset a strained relationship, but doubts linger about its staying power in a world of shifting alliances.
The Backstory: Tariffs and Rare Earths as Weapons
The roots of this détente trace back to a bruising trade conflict that began in 2018 during Trump’s first term, sparked by disputes over intellectual property and trade imbalances. By 2025, U.S. tariffs exceeding 60% on $500 billion of Chinese goods—from smartphones to textiles—had disrupted supply chains and hiked costs for American households. China countered with duties on U.S. agricultural staples like soybeans, choking exports from America’s heartland.
The stakes escalated with rare earths, a group of 17 metals critical for everything from EV batteries to military hardware. China, controlling 70% of global mining and 90% of processing, tightened the screws in April 2025 with a licensing system for rare earth exports, dubbed “Announcement No. 62.” This move sent shockwaves through global industries, halting production lines from Michigan to Munich. Trump responded with a threat of 100% tariffs on all Chinese imports starting November 1, 2025, and hinted at blocking U.S. software exports vital to Chinese tech. Markets wobbled, with analysts warning of a $1 trillion global GDP hit if tensions boiled over.
A Breakthrough in Kuala Lumpur
The tide turned during Trump’s Asia tour, starting with the ASEAN Summit in Malaysia. In late-night talks, U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng hammered out a framework to defuse the crisis. The U.S. agreed to pause its 100% tariff plan, sparing consumers a holiday price surge. China, in turn, delayed its rare earth export controls for a year, easing supply fears for tech and defense firms. Additional wins included China’s pledge to buy more U.S. soybeans, relief for farmers hit by trade barriers, and steps toward resolving the TikTok divestiture saga. Progress on curbing fentanyl precursor exports from China also surfaced, addressing a crisis killing 100,000 Americans annually.
Beijing’s response was measured, with state media noting a “preliminary understanding” pending domestic approval. Trump, ever theatrical, called it a “huge deal” upon landing in Malaysia, eyeing further talks at Mar-a-Lago or Beijing to cement broader cooperation on tech and trade.
Why Rare Earths Are the Real Battleground
Rare earths are more than a trade footnote—they’re the backbone of modern tech and defense. Elements like neodymium and dysprosium power magnets in EVs, wind turbines, and missiles. China’s dominance gives it leverage that the U.S. is scrambling to counter through partnerships with Australia’s Lynas Rare Earths and Canada’s mining sector, alongside domestic efforts like MP Materials’ California project. But mining is messy, with environmental costs and high expenses that struggle against China’s subsidized prices. The April 2025 export curbs exposed vulnerabilities: Apple delayed iPhone production, Boeing scrambled for magnets, and European car plants idled.
The tariff pause offers breathing room, but it’s no cure. U.S. officials accuse China of weaponizing rare earths to destabilize markets, while Beijing calls U.S. tariffs protectionist overreach. Both sides need a deal—China’s exports to the U.S. have dropped 20% in a year, and tariff relief could be a lifeline.
Gyeongju’s High Stakes
At the APEC summit, Trump and Xi face a pivotal moment. The framework hints at balanced trade flows, with China potentially committing to $50 billion in U.S. soybean purchases over five years and reforms to ease port fees. But risks loom large: Trump faces domestic pressure to stay tough on China, while Xi balances calls for self-reliance. External tensions, like Taiwan or EU trade probes, could derail talks. Success could unlock $200 billion in trade by 2027, stabilize prices, and boost growth. Failure risks soaring rare earth costs and inflation spikes of 2-3% in the U.S.
Beyond the Superpowers
The ripple effects are global. Southeast Asia, especially Vietnam, gains from redirected supply chains. Australia and Canada bolster their rare earth roles, with Canberra’s “minerals alliance” with Washington taking shape. Europe, wary of disruptions, eyes its own trade policies. For consumers, a deal means affordable tech and stable farm incomes, but environmentalists warn of ecological fallout from rushed mining elsewhere.
A Delicate Dance
As Trump and Xi meet in Gyeongju, the Kuala Lumpur framework offers hope—a pause in tariffs, a delay in rare earth curbs, and a path to broader deals. Yet, it’s a tightrope walk. “We’ve dodged a bullet,” Bessent said, but durability is uncertain. Trump sees it as dealmaking; Xi plays the long game. Whether this sparks a new era of cautious cooperation or unravels into renewed conflict, the global economy remains a wary spectator, tethered to the moves of two titans.
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