By David Lawder
WASHINGTON (Reuters) – U.S. President Donald Trump and Chinese President Xi Jinping took steps on Thursday to de-escalate their trade war, trading some U.S. tariff reductions and tighter export controls for a pause on Beijing’s new restrictions on rare earth minerals and magnets and a resumption of their purchases of U.S. soybeans.
The deal averts Trump’s threat to impose 100% tariffs on Chinese goods and extends a delicate trade truce between the world’s two largest economies for about a year.
Here are some of the key elements of the Trump-Xi deal reached in Busan, South Korea:
TARIFF REDUCTION ON CHINESE PRODUCTS RELATED TO FENTANYL
The United States will halve the current 20% tariff imposed by Trump on Chinese products related to the supply of fentanyl opioid precursor chemicals from China. The reduction to 10% of tariffs first imposed in February will reduce the overall U.S. tariff rate on Chinese imports from 57% to about 47%, according to Trump administration officials.
That total includes tariffs of about 25% imposed on Chinese imports during Trump’s first term in the White House and a reduced “reciprocal” tariff of 10% imposed in April and previous “most favored nation” tariff rates.
The 47% tariff rate is lower than the 50% tariffs Trump is slapping on goods from India and Brazil after imposing additional punitive tariffs on those countries for political reasons. Canada, the biggest buyer of U.S. exports, would face 35% tariffs on goods that do not comply with a North American trade deal if Trump follows through on his threat of an additional 10% tax on imports from Canada after an announcement by the Ontario government angered him.
PAUSE ON CHINA’S RARE EARTH EXPORT CONTROLS
China agreed to suspend for one year export controls revealed this month on magnets and rare earth minerals, which play a vital role in cars, planes and weapons that have become Beijing’s most potent source of leverage in its trade war with Washington. The new global controls would have required export licenses for products with even traces of an expanded list of elements and were intended to prevent their use in military products.
But the Chinese move does not affect controls that were implemented in April in response to Trump’s “Liberation Day” tariffs, allowing Beijing to maintain some scrutiny and influence over the sector. Lengthy negotiations between the United States and China over the summer determined rare earth research and shipping procedures intended to keep metals produced in China flowing, and those procedures have been expanded.
TRUMP ADMINISTRATION EXPORT CONTROLS PAUSED
The United States agreed to suspend for one year a greatly expanded Commerce Department blacklist of companies that are prohibited from purchasing American high-tech goods, including exports of semiconductor manufacturing equipment, a global change aimed largely at prohibiting the use of subsidiaries and other linked companies to circumvent controls.
The new rules would have automatically included companies that are more than 50% owned by companies already on the list and would have had the biggest impact on Chinese companies, barring US exports to thousands more Chinese companies.
CHINA COMMITS TO BUY SOYBEANS
U.S. Treasury Secretary Scott Bessent said China agreed to buy 12 million metric tons of U.S. soybeans in the current marketing year through January, and committed to buying 25 million metric tons in each of the next three years.
China had largely stopped buying American soybeans this fall and did not buy any in September after sourcing all its beans from Brazil and Argentina. This move created new leverage for Beijing in the negotiations by adding economic pain to American farmers, a key Trump constituency.
But the commitments on soybeans will only cause China to return to its previous levels of American purchases, analysts said. In 2024, the United States exported almost 27 million tons of soybeans to China. China promised to vastly expand soybean purchases in the “Phase One” trade deal with Trump that stopped a trade war in 2020, but never met targets when the COVID-19 pandemic hit.
TRUMP ADMINISTRATION PAUSES NEW PORT FEES
The Trump administration agreed to suspend its new port fees for Chinese-built, owned and flagged ships for one year, which can add millions of dollars in costs to each voyage to U.S. ports. The tariffs, aimed at combating China’s global dominance in shipbuilding, shipping and logistics and reviving American commercial shipbuilding, went into effect on October 14, along with 100% tariffs on Chinese-built ship-to-shore cranes.
Port fees have quickly disrupted cargo flows, driving up container rates as shippers seek to avoid China-linked vessels. China has imposed its own tariffs on ships linked to the United States, including those from global carriers with 25% American ownership.
COOPERATION AGAINST FENTANYL TRAFFICKING
China has agreed to offer the United States “substantial cooperation” to reduce the flow of fentanyl precursor chemicals to the United States, including through Canada and Mexico, in exchange for reducing the fentanyl tariff rate to 10%, Bessent said.
Bessent told Fox Business Network that in the coming weeks, working groups from the two countries will “establish very objective measures” to reduce the flows to determine the success of the effort in curbing the deadly opioid responsible for tens of thousands of overdose deaths in the United States each year.
When Trump first imposed fentanyl-related tariffs, his administration officials said they were wary of China’s aid promises and that the tariffs would remain in place until Beijing took concrete action.
According to a statement from China’s Ministry of Commerce, China said only that the two sides “reached consensus” on fentanyl counternarcotics cooperation.
(Reporting by David Lawder, Andrea Shalal, Doina Chiacu and Michael Martina; Editing by Paul Simao)