US-China deal eases tensions, but deeper economic rifts remain

BUSAN, South Korea: President Donald Trump and China’s leader Xi Jinping met for the first time in six years and agreed to a temporary pause in their ongoing trade dispute between the two major world powers. Busan is the country’s second-largest port city.

The agreement has eased tensions between the U.S. and China, who have been locked in a long trade and technology dispute that has damaged both economies.

China also agreed to relax restrictions on exporting rare earth minerals, which Western countries need to make many products. In addition, Beijing promised to buy large quantities of American soybeans, President Trump said.

Under the deal, the U.S. will lower some of its high tariffs on Chinese goods, while China has agreed to take strong action against the trade of chemicals used to make fentanyl, a highly dangerous drug.

While the temporary peace has eased tensions for now, it doesn’t solve the deeper differences between the two powerful nations. Their economies are separating in many areas, and both are competing fiercely for global dominance, especially in fields like artificial intelligence (AI), reports The Wall Street Journal (WSJ).

While speaking to reporters on his way back to the U.S. from South Korea, President Trump spoke very positively about the meeting.

He said the meeting was better than excellent—on a 0 to 10 scale, with 10 being the best, he rated it “a 12,” meaning it far exceeded expectations.

Trump announced that tariffs on Chinese goods linked to fentanyl will drop from 20% to 10%, effective immediately. He said the cut is a reward for China’s stronger action against chemicals used to make fentanyl. After this move, the overall U.S. tariffs on Chinese imports will fall from 57% to 47%, which is lower than what many had expected.

China agreed to relax export controls on processed rare-earth minerals for one year, providing some relief to global industries. These minerals are essential for manufacturing everything from smartphones to submarines, and China, the world’s top producer, had recently restricted exports, which badly hurt U.S. businesses.

In addition, China promised to buy large quantities of U.S. soybeans, according to President Trump. The country has already purchased several shipments this week, bringing much-needed relief to American farmers who were hit hard during the harvest season after trade tensions pushed Chinese buyers to other markets.

The drop in Chinese soybean purchases badly affected President Trump’s rural supporters. U.S. farmers lost billions of dollars in sales to China, the world’s largest soybean buyer, and urged the government for help. China placed new orders for soybeans just before Thursday’s, 30th October meeting, offering some hope to struggling farmers.

China’s Commerce Ministry confirmed the deal details mentioned by President Trump, including soybean purchases, cooperation on fentanyl control, and relaxing export limits on rare-earth minerals.

The Chinese Commerce Ministry explained that the U.S. has agreed to delay for one year its plan to impose export restrictions on certain subsidiaries of already blacklisted Chinese companies.

These subsidiaries are Chinese-owned firms operating in other countries, including the U.S., and the delay means they can continue limited trade and business activities with American companies for now. This move offers temporary relief to Chinese technology firms while broader trade talks continue.

Both countries agreed to stop charging port fees on each other’s ships for one year. This decision comes right after South Korea announced a $150 billion investment in America’s shipbuilding industry.

Xi has been Trump’s toughest opponent, as he refused to give in to U.S. pressure and fought back against American tariffs while the White House tried to control global trade partners.

The trade standoff has shaken global markets and worried U.S. allies, who are urged by Washington to act against China even though they too face Trump’s tariffs.

Despite Xi’s resistance—or maybe because of it—Trump has often praised him, including during their meeting at a long white table at Gimhae Air Base (located in South Korea) on Thursday, October 30.

Trump said, “President Xi is a great leader of a great country, and I believe we’ll have a strong, long-lasting relationship.”

Xi told Trump, through an interpreter, that China’s growth aligns with Trump’s goal to make America great again, adding that both nations can grow and prosper together by supporting each other.

Since starting his second term, Trump has promised to finish a full trade deal with China to reduce America’s huge trade gap, something he couldn’t achieve in his first term even after a costly trade war.

Trump told reporters on Air Force One that he believes the U.S. and China will sign a trade deal soon, as there are only a few issues left to resolve.

Some trade experts were doubtful. William Bratton from BNP Paribas Securities told WSJ that Thursday’s deals were minor steps, not a major breakthrough or a big change in U.S.–China relations.

Analysts said Xi seemed to gain the upper hand after the meeting, especially on the issue of rare earth minerals.

China started strict export controls on rare earth minerals in April. By October, it tightened these rules even more, adding more rare-earth elements to the restricted list, which upset the Trump administration.

Even if the new rare-earth export rules are delayed, experts believe China will continue using the strict controls it introduced earlier in the spring (March–May).

This would let Beijing keep the power to hurt the U.S. economy by blocking export licenses for American companies that depend on rare earth minerals.

When it comes to fentanyl, everything depends on China’s next steps. The U.S. has long urged China to stop the export of chemicals used to make this deadly synthetic drug, which has caused hundreds of thousands of overdose deaths in America.

Stricter rules may not fix the fentanyl problem, as Chinese producers often change the chemical formula slightly to bypass government regulations.

Experts say China must take stronger action, like arresting people who make the chemicals used for fentanyl. Such steps are vital to stop these chemicals from reaching Mexican drug cartels.

For years, China has treated anti-drug cooperation as a bargaining tool. It would promise to help the U.S. curb fentanyl and related chemicals if Washington made certain compromises—but each time relations worsened, Beijing would quietly withdraw its support, leaving the issue unresolved.

For American importers buying from China, the tariff cut to 10% on fentanyl-related products brings some relief. It could make Chinese goods cheaper again, after high tariffs earlier this year reduced trade between the two countries.

According to Chinese government data, during the first nine months of this year, China’s exports to the U.S. dropped by nearly 17% compared to the same period last year. This means fewer Chinese goods were sold to America, mainly due to high tariffs and trade tensions between the two countries.

Even with the new trade deal, U.S. buyers are still shifting their supply chains away from China. Many companies have moved production to Southeast Asian countries (like Vietnam, Thailand, Indonesia, and Malaysia), spending millions of dollars to reduce their dependence on China.

Many people still see the U.S.–China relationship as unstable, fearing that Trump could impose new tariffs anytime he wants.

Trump said that Taiwan—seen as the most dangerous issue between the U.S. and China—was not discussed during the meeting.

There are growing fears in Taiwan that Trump might use the island as a bargaining chip in his trade talks with China. People worry he could reduce U.S. support for Taiwan’s independence or soften America’s stance against Beijing’s territorial claims, if it helps him secure better trade deals with China.

Trump said he will visit China in April, and President Xi will later visit the U.S. in return.

Trump and Xi last met in 2019 during an 80-minute lunch at the G20 summit in Osaka, Japan, where they agreed to pause their trade war and ease tensions.

At that time, the Trump administration was pressuring China to change its economic policies, asking it to stop giving government subsidies to industries and to end the practice of forcing American companies to share their technology to do business in China.

The “Phase One” trade deal signed in early 2020 didn’t solve the main issues. Instead, it only required China to buy more soybeans from U.S. farmers, which Beijing mostly failed to do. The second phase of the deal never happened, leaving the major trade problems between the two countries unresolved.

(Girish Linganna is an award-winning science communicator and a Defence, Aerospace & Geopolitical Analyst. He is the Managing Director of ADD Engineering Components India Pvt. Ltd., a subsidiary of ADD Engineering GmbH, Germany.)