US and China reach tentative trade agreement as Trump and Xi prepare for summit

The United States and China have reached a tentative agreement that eases the risk of a renewed trade war and provides relief for global investors bracing for fresh economic volatility. The breakthrough was announced ahead of a pivotal summit between President Donald Trump and President Xi Jinping, scheduled to take place later this week in Korea—the first face-to-face meeting between the two leaders since 2019.

US Treasury Secretary Scott Bessent confirmed the existence of a “substantial framework” after two days of intense negotiations with Chinese officials in Malaysia. He stated that the deal removes President Trump’s threat of sweeping one hundred percent tariffs on Chinese goods, a move that had unsettled global markets when first floated. In exchange, China has pledged to delay newly announced restrictions on rare earth mineral exports, a sector in which it holds considerable global dominance. These minerals are vital for manufacturing high-tech equipment and defence systems, making their continued flow critical for a range of Western industries.

A significant element of the agreement involves a commitment from China to resume “substantial purchases” of American soybeans. Farmers in the United States, severely impacted by reduced exports following the imposition of Chinese tariffs in March, have keenly felt the effects. Last year, China imported 13 billion dollars’ worth of American soybeans, but the stand-off resulted in zero purchases by September. The revival of this vital trade stream is expected to offer financial respite to US agricultural producers.

Trade tensions had escalated in recent weeks as both China and the United States introduced tit-for-tat levies on shipping and port docking fees, raising transport costs and fuelling broader market uncertainty. The preliminary deal now signals de-escalation, with Chinese trade envoy Li Chenggang confirming a “preliminary consensus” has been reached, aimed at reducing friction and restoring stability.

Discussions have also expanded to address non-tariff issues such as the import of fentanyl into the United States, with both sides agreeing to work collaboratively on curbing illicit flows. On the technology front, the long-discussed sale of TikTok’s US operations is expected to close, giving a consortium led by Oracle and Silver Lake, with potential participation from prominent investors like Rupert Murdoch and Michael Dell, control of the American business.

The United States has simultaneously secured separate bilateral trade deals with Malaysia and Cambodia, with the Malaysia pact focusing on securing alternative critical mineral sources should further tensions with China arise. President Trump described the trade breakthrough as a “good deal with China”, emphasising mutual interests in stabilising economic ties. News of progress sent stock markets upward following a period of volatility, reflecting renewed investor optimism. Markets that had recoiled from Trump’s confrontational rhetoric earlier in the month have responded positively as diplomatic engagement resumes.