THE world’s two biggest economies have stepped back from the edge as President Donald Trump and Xi Jinping averted a full-blown trade war.
China and the US have agreed to a “framework” deal that halts Trump’s threatened 100 per cent tariffs and delays Beijing’s rare earth export restrictions — a move that could have crippled global manufacturing.
China and the US agreed to a ‘framework’ deal, averting a full-blown trade warCredit: Reuters
The agreement halts Trump’s threatened 100 per cent tariffs and delays China’s rare earth export restrictionsCredit: Alamy
The deal covers tariffs, fentanyl cooperation, rare earth minerals, and TikTok’s US futureCredit: AP
After weeks of escalating threats, fiery rhetoric and market panic, the breakthrough marks a striking shift in tone ahead of the pair’s high-stakes meeting in South Korea later this week.
Treasury Secretary Scott Bessent said in Kuala Lumpur after two days of intense talks: “The president had given me maximum leverage when he threatened 100 per cent tariffs if the Chinese imposed their rare earth global export controls.
“I think we have averted that, so the tariffs will be averted.”
China, which controls around 90 per cent of global rare earth processing, had been preparing to impose sweeping new export licensing rules that would have taken effect next month.
Bessent said Beijing would “delay that for a year while they re-examine it.”
The dramatic climbdown comes just two weeks after Trump thundered that China’s export controls were a “moral disgrace” and slapped what he called on Beijing in retaliation.
At the time, the President declared he had “no reason” to meet Xi — but the tone has shifted.
Now, both sides are preparing for what could be the most consequential handshake of Trump’s second term.
Jamieson Greer, the US trade representative, said the Kuala Lumpur talks had produced “a framework for a possible trade pact” that would be “ready for the leaders to review.”
Chinese negotiator Li Chenggang echoed that sentiment, saying the two sides held “candid and in-depth discussions” and reached a “preliminary consensus.”
White House officials say Trump and Xi will meet in Seoul on Thursday to seal the deal, which covers tariffs, fentanyl cooperation, rare earth minerals and a long-awaited decision on TikTok’s US future.
Bessent hinted that a “final deal” over TikTok — a flashpoint in US-China relations since Trump’s first term — could be announced at the summit.
Trump, en route to Asia, told reporters aboard Air Force One that he was open to adding another unpredictable twist — a meeting with North Korean tyrant Kim Jong-un.
“I would if he would contact,” he said.
“They have a lot of nuclear weapons but not a lot of telephone service.”
He added: “I’m open to it. I had a great relationship with them… If you want to put out the word, I’m open to it.”
The US President touched down in Malaysia on Sunday, where he finalised a string of smaller trade agreements with Southeast Asian nations including Vietnam, Thailand and Malaysia — deals designed to tighten the economic noose around China’s regional influence.
He also presided over the signing of a ceasefire between Thailand and Cambodia, proudly declaring it “a momentous day for all of the people of southeast Asia.”
But the real test looms in Seoul.
The showdown comes after months of economic brinkmanship that saw Beijing match Washington tariff for tariff in a tit-for-tat spiral.
The trade war peaked at an eye-watering 154 per cent combined rate earlier this year before an emergency Geneva truce pulled it back to manageable levels.
President Trump attends the 47th Association of Southeast Asian Nations (ASEAN) summit in Kuala Lumpur, Malaysia, on SundayCredit: Reuters
US President Donald Trump holds the US and Malaysian national flags at a welcome ceremony upon arrival at Kuala Lumpur International Airport in Kuala LumpurCredit: AFP
Relations then cratered again when China abruptly reimposed restrictions on rare earth exports — a move the White House saw as a direct shot at Trump’s tech policies and chip sanctions.
Trump’s furious response on October 10 — the so-called “Liberation Day tariffs” — rattled Wall Street, sparked a sell-off, and sent the S&P 500 tumbling 2.7 per cent in a single day.
Beijing’s retaliation only deepened the standoff, with Chinese officials accusing the US of weaponising trade.
Now, after a weekend of frantic diplomacy, both sides appear to have blinked.
China has reportedly agreed to resume US soybean imports — a politically crucial concession after cutting purchases to zero earlier this year.
“The soybean farmers are going to be extremely happy with this deal,” Bessent said.
Greer confirmed that both sides also discussed extending tariff truces and rebalancing port fees imposed on Chinese-built or Chinese-owned ships, another flashpoint in the long-running dispute.
The timing of the deal is politically electric.
Trump arrives in Asia fresh from a fortnight of explosive foreign policy moves — , freezing Canada out of trade talks , and boasting of “ending eight wars” during his second term.
Now, the self-styled dealmaker is poised for what could be his biggest diplomatic win yet — defusing a global trade time bomb.
The deal will be reviewed by both leaders in Seoul this weekCredit: AP 
