U.S. President Donald Trump and Chinese President Xi Jinping reach a one-year trade truce in Busan, easing tariffs and rare earth restrictions [Image by Bhaskar English]
The two leaders met at an air force base in Busan, South Korea. Their 90-minutes, face-to-face talks were the first direct talks of President Trump’s second term and resulted in a tentative agreement which brings some relief from the tensions that have upset markets around the globe and disrupted supply chains.
Tariff Reductions and Fentanyl Crackdown
President Trump announced that the United States would lower tariffs on certain Chinese imports relating to fentanyl from 20% to 10%, effectively lowering the overall average tariff on Chinese goods from approximately 55% to 47%. The tariff cuts are to be implemented with immediate effect.
In exchange, Xi Jinping promised that China would assertively crack down on illegally exporting fentanyl and precursor chemicals used to manufacture the deadly synthetic opioid. Trump also commented that Beijing had taken “very strong action” against illegal exports.
“China is going to work very hard to stop the flow,” he told reporters aboard Air Force One. “They’re taking significant steps, and I believe they’re serious this time.”
Recently, the U.S. Drug Enforcement Administration reported a decline in purity and seizure of fentanyl at the southern border, which may suggest tighter supply lines. On that note, Trump indicated that the progress had played a big part in the lowering of the tariffs.
China also agreed to delay for one year the imposition of its export controls on rare earth elements, materials essential in semiconductors, electric vehicles, and advanced weapon systems. Earlier this month, Beijing had moved to tighten those exports, prompting Trump with a threat to slap 100% tariffs on all Chinese imports effectively starting November 1.
In calling the agreement on rare earths “a major victory” for manufacturers in the U.S., Trump proclaimed, “All of the rare earth has been settled,” visualizing that the truce will last “for a long time, long beyond the year.”
The Chinese Ministry of Commerce confirmed the suspension, declaring that the two sides have “reached consensus on important trade issues” and will complete “follow-up work as soon as possible.”
The accord was welcome news for American farmers and shipping companies alike. Chinese purchases of U.S. soybeans, sorghum, and other agricultural products would resume at large scales, with Secretary of the Treasury Scott Bessent stating this includes 25 million metric tons of soybeans a year for the next three years.
“This is a big win for our farmers,” Trump said. “The deals start right away.”
On top of that, both countries will suspend retaliatory port charges for one year for ships built by or owned by each other’s companies. Trump chose to delay a recently planned U.S. surcharge on Chinese-built vessels, stating that China would also suspend its fees on U.S. ships.
Outside of the trade-related topics, Trump and Xi discussed issues of technology and energy cooperation. The U.S. continues negotiations around the U.S. ownership of TikTok, although that issue remains fairly vague. The Ministry of Commerce of China stated that both sides will properly address the issue.
Trump stated he placed Xi under pressure to collaborate with Nvidia on exports to China without mentioning the most advanced Blackwell GPUs. “That’s really between China and Nvidia,” he said, adding, “We are sort of the arbitrator.”
The leaders also discussed U.S. liquefied natural gas (LNG) sales to China. Trump hinted at a possible deal around Alaska’s proposed $44 billion LNG project, saying Energy Secretary Chris Wright and Interior Secretary Doug Burgum will lead talks with Chinese officials.
Mixed Market Reaction
Global markets reacted cautiously; the Shanghai Composite Index slipped a bit from a decade high, and U.S. soybean futures lost ground as traders awaited details on China’s purchase commitments.
“The truce removes the immediate threat of escalation,” said Besa Deda, chief economist at William Buck Advisory in Sydney, “but it doesn’t solve the structural issues dividing the two countries.”
Some observers interpreted the truce as a temporary halt, instead of permanent peace.
“This is an uneasy truce in a long-simmering trade war,” said Nicholas Burns, former U.S. ambassador to China. “Unresolved are the underlying disputes over technology, industrial policy, and global influence.”
Despite the skepticism, Trump regarded the meeting as a breakthrough. “It was an amazing meeting,” he remarked, referring to the talks as “a 12 out of 10.”
Xi retained a more sober tone, telling Trump through a translator, “China’s development and rejuvenation are not incompatible with President Trump’s goal of making America great again.”
Chinese state media presented the meeting as a testament to Xi’s steady leadership. “We have the confidence and capability to navigate all kinds of risks and challenges,” read an Xinhua report.
Trump announced that he would pay a visit to China in April 2026; Xi was expected to come to the U.S. later that year, either to Palm Beach, Florida, or Washington, D.C.
Trump stated, “We have a deal,” adding that “every year we’ll renew it, and I think it’ll last long beyond one year.”
For now, the two largest economies of the world have stepped back from the brink of a full-out trade war. But as one senior U.S. trade official remarked after the talks: “It’s a ceasefire, not peace.”
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