Gyeongju, South Korea – U.S. President Donald Trump and Chinese President Xi Jinping have agreed to reduce the temperature of a bitter conflict that threatens to upend the global economy and halt mutual escalation of their trade war.
President Trump and President Xi signed a one-year trade ceasefire on Thursday on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in South Korea. The two leaders met face-to-face for the first time since 2019.
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But while the agreement between President Trump and President Xi Jinping provided respite for businesses worried by months of trade salvos, it did little to lift existing trade barriers and left many points of contention between the two countries unresolved.
Dennis Wilder, a professor at Georgetown University who worked on China issues for the CIA and the White House National Security Council, told Al Jazeera: “The clear outcome of this meeting will be a pause and a modest setback in the trade war.”
“Both sides have not given up their trade weapons, they have simply agreed to stop firing as long as both sides honor their agreements,” Wilder said.
Under the agreement, China will agree to postpone its planned restrictions on rare earth exports, while the United States will lift its threatened 100% tariffs on Chinese products.
Trump also said he would lower fentanyl tariffs from 20% to 10% after President Xi agreed to work “very diligently” to stop the flow of synthetic opiates.
“I believe we will work hard to stop the deaths that are coming,” President Trump said on Air Force One after leaving South Korea.
President Trump praised his 90-minute meeting with Xi as “amazing” and said the rare earth issue was “resolved” under the agreement, which he said would be renegotiated annually.
“We have no problem with rare earths, and I hope they disappear from our vocabulary for a while,” President Trump said.
Trump, whose meeting with Xi capped off a whirlwind tour of Asia that included visits to Malaysia and Japan, said China had also agreed to buy “vast amounts” of U.S. soybeans.
After Trump’s remarks, Xi said the two sides had reached an “agreement to address the issues” during the meeting, but did not directly address specific details of the agreement.
Xi said the United States and China should “promptly elaborate and finalize follow-up measures” to implement the agreement and “provide concrete results that will reassure both countries and the global economy,” state news agency Xinhua reported.
China’s Ministry of Commerce later confirmed the details of the agreement, including a one-year postponement of export restrictions.
The department also said President Trump suspended plans to extend the U.S. government’s blacklist, which prohibits doing business with U.S. companies and individuals, to subsidiaries, and both sides agreed to suspend retaliatory port fees.
Asian stock markets were little moved, with benchmark indexes in Hong Kong, Shanghai and Sydney closing lower, and Japan’s main index ending flat.
China’s plan to require companies around the world to obtain permits to export products containing even trace amounts of rare earths has raised concerns that it could cause major disruption to global supply chains.
Chinese producers have a near monopoly on the supply of critical minerals used to make everything from smartphones to fighter jets.
Xiang Guo, a partner at Hutong Research, a Shanghai-based consulting firm, said the reduction in fentanyl tariffs was “almost expected.”
“China has been asking for a reduction in fentanyl since Stockholm, and now they are using rare earths as leverage to get what they want,” Guo told Al Jazeera, referring to the U.S.-China trade talks in the Swedish capital in July.
“This is a 10% reduction instead of 20%, but this is probably because the US still wants to maintain some influence as the two countries negotiate further in the future. In any case, this tariff cut on China will reduce the competitive disadvantage of Chinese products against ASEAN countries,” Guo said, referring to the 11 Southeast Asian economies, many of which, like China, are heavily dependent on exports.
Expectations for a deal were muted before the summit, and Thursday’s agreement left in place most tariffs and export restrictions that hamper trade between the two countries.
President Trump’s pledge to cut fentanyl tariffs in half will leave the average U.S. tariff on Chinese products at about 47%, and China’s average tariff on U.S. products at about 32%.
Washington continues to include more than 1,000 Chinese companies on its export control list, while Beijing has placed dozens of U.S. companies on a similar “untrusted companies list.”
Deborah Elms, head of trade policy at Singapore’s Heinrich Foundation, said the deal could be seen as a “partial freeze” or “minor setback” in the U.S.-China trade war.
Cameron Johnson, a partner at Shanghai-based consultancy TidalWave Solutions, said there was no way U.S.-China relations would deteriorate in the short term and that the deal was “probably the best thing both sides could have done given the circumstances.”
But Johnson referred to Trump’s comments that the agreement would be subject to an annual review.
“This will allow both sides to adjust their relationship and purchasing power every year from now on,” he told Al Jazeera.
