US and China reach preliminary trade consensus ahead of Trump–Xi meeting

The United States and China have reached a preliminary understanding on several contentious trade issues, setting the stage for US President Donald Trump and Chinese President Xi Jinping to finalise a broad agreement later this week.

After two days of high-level discussions in Malaysia, which concluded on Sunday, a Chinese official announced that both sides had reached “a preliminary consensus” on export controls, fentanyl, and shipping levies.

U.S. Treasury Secretary Scott Bessent confirmed in an interview with CBS News that Trump’s threat to impose 100% tariffs on Chinese goods was effectively off the table. He added that China was expected to make substantial soybean purchases and defer its sweeping rare-earth export controls. Bessent said that he expected both the threat of the 100% tariffs and the immediate imposition of a worldwide export control regime by China to have gone away.

In a separate interview with ABC News, Bessent said that he believed China would delay its rare-earth restrictions for a year while reexamining them. He also hinted at a wide-ranging agreement that could extend the current tariff truce, resolve disputes over TikTok’s sale, and ensure the continued flow of rare-earth magnets critical to advanced manufacturing.

Bessent added that Trump and Xi are also expected to discuss a global peace initiative, with Trump seeking Xi’s support in addressing Russia’s war in Ukraine.

The upbeat tone marked a dramatic shift from recent weeks of tension, when Beijing’s export restrictions and Trump’s retaliatory tariff threats appeared to reignite fears of a full-blown trade war.

Markets reacted positively to news of progress. The Australian and New Zealand dollars climbed against the US dollar, while safe-haven currencies such as the Japanese yen and Swiss franc edged lower. Bitcoin also gained for a fourth consecutive day.

Trump, speaking to reporters at the Association of Southeast Asian Nations (ASEAN) summit in Kuala Lumpur, said he expected “a good deal with China” and indicated that additional follow-up meetings could take place in both countries. “They want to make a deal, and we want to make a deal,” he said.

Chinese trade envoy Li Chenggang said both nations had reached a consensus on fentanyl, hinting that Washington might lift or reduce the 20% tariff imposed to pressure Beijing over chemical exports used in the drug’s production. Li added that discussions also covered US port service fees on Chinese ships, which had prompted retaliatory levies on US vessels.

Li, whom Bessent had earlier described as unhinged, acknowledged that the negotiations had been intense but praised the progress that had been made. He told reporters that the current turbulence and twists and turns were not something they wished to see, adding that a stable China–U.S. trade and economic relationship was beneficial for both countries and for the rest of the world.

A breakthrough on soybean purchases would mark a significant political win for Trump. China had imposed retaliatory tariffs on US farm goods in March, cutting off American soybean exports before the harvest. Last year, China bought $13 billion worth of US soybeans – over 20% of the total crop – before the freeze hit farmers in key political regions.

Another key issue in the talks was rare earths, essential materials for semiconductors and jet engines. China had restricted exports earlier this year in response to Washington’s trade actions, but flows resumed under a temporary truce. This month, however, Beijing expanded its export curbs after the US tightened restrictions on Chinese companies.

The negotiations took place at Kuala Lumpur’s Merdeka 118 skyscraper while Trump attended the ASEAN summit nearby, where he also worked on trade diversification deals with other Southeast Asian nations.

The Chinese delegation was led by Vice Premier He Lifeng and Vice Finance Minister Liao Min, while the US team included Trade Representative Jamieson Greer.

The upcoming Trump-Xi meeting, scheduled for Thursday, will be their first face-to-face encounter since Trump returned to the White House. Trump said that they would be talking about many things and added that he thought there was a really good chance of making a very comprehensive deal.