Behind the Handshake: The Real Deal on US-China Trade

U. S. President Donald Trump and Chinese President Xi Jinping agreed to reduce tensions in their trade war by modifying some tariffs and export controls. The deal, reached during a meeting in Busan, South Korea, allows for a pause in China’s new restrictions on rare earth minerals and magnets, while China will resume buying American soybeans. This agreement prevents Trump from imposing a 100% tariff on Chinese goods and extends a temporary trade truce for about a year.

Key points of the agreement include the U. S. reducing the existing 20% tariff on Chinese goods linked to fentanyl chemicals by half, bringing it down to 10%. This reduction lowers the overall U. S. tariff rate on Chinese imports to about 47%, down from 57%. This rate includes a 25% tariff from Trump’s first term and a new 10% tariff imposed earlier.

China will halt its recently announced export controls for one year that affect rare earth minerals and magnets, crucial for various high-tech products. Although these new controls aimed to limit exports for military uses, they do not impact earlier controls established in response to U. S. tariffs. During extensive negotiations, both countries established procedures to ensure the continued supply of these materials from China.

The U. S. also agreed to pause a Commerce Department blacklist that would have significantly expanded restrictions on Chinese companies that buy U. S. technology and equipment. These new rules would have prohibited sales to firms partly owned by blacklisted companies, significantly impacting Chinese businesses.

Moreover, China committed to buy 12 million metric tons of U. S. soybeans in the current year and increase purchases to 25 million metric tons annually over the next three years. China had stopped buying American soybeans recently, sourcing them instead from Brazil and Argentina, which pressured U. S. farmers.

The U. S. administration decided to delay new port fees for Chinese-owned ships, which could have increased shipping costs to U. S. ports, thus affecting cargo flow and container rates. These fees were part of efforts to challenge China’s dominance in shipping and logistics.

Finally, China agreed to cooperate with the U. S. in reducing the flow of fentanyl precursor chemicals, especially from Canada and Mexico, as part of their negotiation to cut tariffs on these chemicals. However, U. S. officials had concerns about past promises from China and emphasized the need for measurable efforts to combat fentanyl trafficking. The two sides reached a consensus on cooperation concerning fentanyl control, according to China’s Ministry of Commerce.