Trade Truce

Trump and Xi Hit Pause on Tariffs 

The US President Donald Trump and Chinese counterpart Xi Jinping have agreed to a one-year trade truce, trimming tariffs and easing other trade restrictions.

• The US lowers overall tariffs on Chinese goods from 57% to 47%. 
• China lifts some export restrictions on rare earth metals. 
• China resumes large-scale US farm purchases, including soybeans.  
• China pledges stronger action to curb the flow of fentanyl products to the US. 
• Tit-for-tat port fees suspended for one year.

Rare Earths at the Heart of the Deal

Trump and Xi had their first meeting in six years in South Korea, just a couple of weeks after the White House threatened 100% tariffs over China’s rare earth restrictions.  

Beijing has paused new curbs, but earlier limits from April remain. Trump called the issue “settled”, though the deal will be renegotiated annually.

The US has recently secured rare earth access deals with Australia, Malaysia, and Japan. However, China controls over 90% of the global processing of rare earths — essential in semiconductors, electric cars, military hardware, and other applications.

Key Issues Still in Limbo

Several flashpoints remain unresolved: 

• Talks continue on China’s access to high-end Nvidia chips.
• No concrete progress to resolve the ownership of TikTok’s US operations.
• Taiwan was not openly discussed. 
• Tariffs are lowered but remain high.

While both sides emphasized goodwill, the deal is a tactical pause — not a reset.

Markets Watch, But Stay Cautious

The agreement was welcomed, but markets barely moved. The deal had already been largely priced in, and it only offers temporary relief, not a long-term solution.  

• Asian indices closed flat or lower. 
• Europe and US stocks edged down.
• Soybean futures dipped despite China resuming purchases. 
• The rare earths index rose modestly.