US-China Agree Framework of Trade Deal Ahead of Trump-Xi Meeting

The United States and China have reached a trade agreement framework aimed at preventing tariffs on imports. This deal, established before a key summit, addresses significant trade tensions and impacts on global markets, including US agriculture.

The United States and China have reached a framework for a trade agreement just before President Donald Trump and Chinese President Xi Jinping are set to meet. This deal, formed during the ASEAN summit in Malaysia, aims to prevent the imposition of 100% tariffs on Chinese imports starting 1 November. It also includes a "final deal" concerning TikTok's sale in the US.

President Trump arrived in Malaysia for the summit, marking the first stop in his five-day Asia tour. This tour is expected to culminate with a meeting with Xi in South Korea. After discussions, Trump expressed optimism about reaching an agreement with China.

Trade Tensions and Tariff Truce

Treasury Secretary Scott Bessent mentioned that China would delay export controls on minerals used in fighter jets, smartphones, and electric vehicles for a year as part of this truce. China's top trade negotiator, Li Chenggang, stated that both sides had reached a "preliminary consensus" and would proceed with their internal approval processes.

Li highlighted the intense consultations and constructive exchanges aimed at finding solutions to address concerns. The US position has been firm throughout these negotiations. An agreement between the US and China reduces the risk of a global trade war that could impact car production across Europe and the UK.

Impact on Global Trade

This development follows months of heightened trade tensions between these economic giants, triggered by Trump's tariff announcement outside the White House in April. With only days left before their current tariff truce was set to expire, Xi demonstrated no intention of yielding to Trump's threats of 100% tariffs.

Instead, China imposed controls on rare earth mineral exports crucial for electronic window and boot openings in cars. Trump accused Beijing of becoming hostile and attempting to hold the world captive by controlling 60% of global production and 90% of rare earth refineries.

US-China Trade Relations

China also targeted the US agriculture sector by halting soya bean purchases from America. As the largest customer for US soya beans, importing half of all $24 billion (£18 billion) exports in 2024, this move significantly impacted American farmers.

Bessent anticipates extending the tariff truce beyond its 1 November expiry date. He expects China to resume substantial purchases of US soya beans after sourcing them from Brazil and Argentina instead during September.