US and China Take Steps to Ease Trade Strains Before Trump-Xi Summit
Top economic officials from the U.S. and China concluded their initial day of discussions, with a Treasury spokesperson characterizing the talks as “very constructive.” The two largest economies in the world are striving to prevent an escalation of their trade war and are working to ensure that a meeting takes place next week between U.S. President Donald Trump and Chinese President Xi Jinping. The discussions occurring during the Association of Southeast Asian Nations summit will outline a way forward following Trump’s warning of new 100% tariffs on Chinese goods and additional trade restrictions set to begin on November 1. This move comes in response to China’s significantly increased export controls on rare earth magnets and minerals. The recent actions, which also include an expanded U.S. export blacklist that covers thousands more Chinese firms, have disrupted a delicate trade truce crafted by U.S. Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, and Chinese Vice Premier He Lifeng over four previous meetings since May. He smiled and waved to reporters but refrained from making any comments as the Chinese delegation departed the venue for the talks, Kuala Lumpur’s Merdeka 118 tower, the second-tallest building in the world.
The three officials are set to facilitate a meeting between Trump and Xi next Thursday at the Asia-Pacific Economic Cooperation summit in South Korea. This high-stakes dialogue may focus on potential interim relief regarding tariffs, technology controls, and Chinese purchases of U.S. soybeans. Just moments before the discussions commenced, Trump departed from Washington to embark on his tour of Asia, outlining several key points for his meeting with Xi. He stated that farmers, affected by a Chinese freeze on U.S. soybean purchases, along with the democratic island of Taiwan, which China asserts as its own territory, would be among the topics of discussion. Trump stated that he does not have any plans to visit Taiwan. He also highlighted the release of jailed Hong Kong media tycoon Jimmy Lai, whose case has emerged as the most prominent illustration of China’s crackdown on rights and freedoms in the Asian financial hub. “We have a lot to discuss with President Xi, and he has much to convey to us. I think we’ll have a good meeting,” Trump said.
Trump departed from Washington on Friday night for a five-day journey to Malaysia, Japan, and South Korea. This marks his inaugural visit to the region and his longest trip overseas since assuming office in January. Aboard Air Force One, he informed reporters that he would also appreciate China’s assistance in Washington’s dealings with Russia. Josh Lipsky, international economics chair at the Atlantic Council in Washington, stated that Bessent, Greer, and He must first seek a resolution to their disagreement regarding U.S. technology export restrictions and China’s rare earths regulations, which Washington aims to overturn. “I’m not sure the Chinese can agree to that. It’s the primary leverage that they have,” Lipsky said. Some of those announcements may be attributed to Trump, who is scheduled to arrive in the Malaysian capital on Sunday. “We won’t know if Beijing has successfully counterbalanced the U.S.’s export controls with restrictions of their own or if they’ve induced a continuation of an escalatory spiral until Trump and Xi meet,” said Scott Kennedy. “If they make a deal, their gambit will have paid off. If there’s no deal, then everyone will need to prepare for things to get much nastier.”
The two largest economies in the world are striving to prevent a resurgence of their tariff escalation, which could reach triple-digit levels on both sides. Bessent and Greer’s initial encounter with He in Geneva in May resulted in a 90-day truce, significantly reducing tariffs to approximately 55% on the U.S. side and 30% on the Chinese side, while also resuming the flow of magnets. It was prolonged during further discussions in London and Stockholm and was set to conclude on November 10. However, the fragile truce began to unravel at the close of September, as the U.S. Commerce Department significantly broadened an export blacklist to automatically encompass firms that are more than 50% owned by companies already listed, thereby prohibiting U.S. exports to thousands of additional Chinese firms. On October 10, China implemented new global rare earth export controls, with the intention of preventing their application in military systems. Bessent and Greer condemned China’s action as a “global supply chain power grab” and pledged that the U.S. and its allies would not tolerate the restrictions. Reports says that the Trump administration is contemplating a strategy to intensify restrictions on a wide range of software-driven exports to China, including laptops and jet engines. On Friday, the Trump administration heightened tensions by declaring a new tariff investigation into China’s “apparent failure” to adhere to the terms of the 2020 U.S.-China “Phase One” trade agreement, which had put a pause on their trade war during Trump’s initial term.
