USChina

Gyeongju, South Korea – As US President Donald Trump and Chinese leader Xi Jinping prepare to meet for the first time since 2019, Washington and Beijing appear poised to reach a deal to lower the temperature of their fierce rivalry.

But while Trump and Xi are widely expected to de-escalate US-China tensions in South Korea on Thursday, expectations are modest for how far any agreement will go to resolve the myriad points of contention between the world’s two largest economies.

Many details of the expected deal that have been flagged in advance relate to avoiding future escalation, rather than rolling back the trade war that Trump launched during his first term and has dramatically expanded since returning to office this year.

Some of the proposed measures involve issues that have only arisen within the last few weeks, including China’s plan to impose strict export controls on rare earths from December 1.

Whatever Trump and Xi agree to on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, there is little doubt that Washington and Beijing will continue to butt heads as they jockey for influence in a rapidly shifting international order, according to analysts.

“I have modest expectations for this meeting,” said Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore.

“I think, no matter what happens this week, we haven’t seen the end of economic tensions, tariff threats, export controls and restrictions, and the use of unusual levers like digital rules,” Elms told Al Jazeera.

Contours of a deal

While the exact parameters of any deal are still to be determined by Trump and Xi, the contours of an agreement have emerged in recent days.

US Secretary of the Treasury Scott Bessent said in media interviews this week that he expected China to defer its restrictions on rare earths and that Trump’s threatened 100 percent tariff on Chinese goods was “effectively off the table”.

Bessent said he also anticipated that the Chinese side would agree to increase purchases of US-grown soya beans, enhance cooperation with the US to halt the flow of chemicals used to manufacture fentanyl, and sign off on a finalised TikTok deal.

While heading off a further spiralling in US-China ties, a deal along these lines would leave intact a wide array of tariffs, sanctions and export controls that hinder trade and business between the sides.

Since Washington and Beijing reached a partial truce in their tit-for-tat tariff salvoes in May, the average US duty on Chinese goods has stood at more than 55 percent, while China’s average levy on US products has hovered at about 32 percent.

Washington has blacklisted hundreds of Chinese firms deemed to pose national security risks, and prohibited the export of advanced chips and key manufacturing equipment related to AI.

China has, in turn, added dozens of US companies to its “unreliable entity” list, launched antitrust investigations into Nvidia and Qualcomm, and restricted exports of more than a dozen rare earths and metallic elements, including gallium and dysprosium.

US-China trade has declined sharply since Trump re-entered the White House.

China’s exports to the US fell 27 percent in September, the sixth straight month of decline, even as outbound shipments rose overall amid expanding trade with Southeast Asia, Latin America, Europe and Africa.

China’s imports of US goods declined 16 percent, continuing a downward trend since April.

“The structural contradictions between China and the United States have not been resolved,” said Wang Wen, dean of the Chongyang Institute for Financial Studies at Renmin University of China in Beijing, predicting continuing friction and “even worse” relations between the superpowers in the future.

“Most importantly, China’s strength is increasing and will surpass that of the United States in the future,” Wang told Al Jazeera.

‘De-escalation unlikely’

Shan Guo, a partner with Shanghai-based Hutong Research, said he expects the “bulk” of the deal between Trump and Xi to be about avoiding escalation. “A fundamental de-escalation is unlikely given the political environment in the US,” Guo told Al Jazeera.

But with the US having no alternative to Chinese rare earths and minerals in the near-term, Washington and Beijing could put aside their differences for longer than past trade truces, Guo said.

“This means reduced downside risks in US-China relations for at least a year, or perhaps even longer,” he said.

Dennis Wilder, a professor at Georgetown University who worked on China at the CIA and the White House’s National Security Council, said that while he is optimistic the summit will produce “positive tactical results”, it will not mark the end of the trade war.

“A comprehensive trade deal is still not available,” Wilder told Al Jazeera.

“Bessent and his Chinese counterpart will continue negotiating in hopes of a more lasting agreement if and when President Trump visits China next year.”

Trump and Xi’s go-to language on the US-China relationship itself points to the gulf between the sides.

While Trump often complains about the US being “ripped off” by China, Xi has repeatedly called for their relations to be defined by “mutual respect” and “win-win cooperation”.

“The United States should treat China in a way that China considers respectful,” said Wang of Renmin University.

“They have to respect China, and if they don’t, then the United States will receive an equal response until they become able to respect others,” he added.

Global markets were buoyed on Monday morning by expectations of another Fed rate cut and growing optimism that the US and China are moving closer to a trade deal, following comments from President Donald Trump.

The optimism wiped out gains in safe-haven assets such as gold futures and boosted stock exchanges across the globe.

Yet, leading European benchmark indexes opened mostly flat, except for Milan’s FTSE MIB, which was up by 0.61%. Madrid IBEX 35 also gained 0.37% by around 11:00 CEST.

At the same time, European benchmark STOXX 600, as well as the FTSE 100 in London, remained nearly flat. The DAX in Frankfurt gained 0.15% while Paris’ CAC 40 lost less than 0.1%. This came after credit rating agency Moody’s changed France’s outlook from stable to negative on Friday.

Investors in Europe are closely watching for signs of economic health, with one of the strongest indicators — the first reading of the eurozone’s third-quarter GDP — due on Thursday.

On the same day, the European Central Bank (ECB) is scheduled to hold its monetary policy meeting. Given that inflation in the bloc has remained around the bank’s 2% target, the ECB is expected to hold interest rates steady this week for its third straight meeting. The key deposit rate has been at 2% since June.

US-China relations

Across the globe on Monday, US futures were mostly up in pre-market trading. This came as Asian shares rallied too, with Japan’s benchmark Nikkei 225 topping 50,000 for the first time.

Later this week, the US President has a scheduled meeting with the Chinese leader Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation forum (known as APEC), to discuss the trade deal between the world’s two strongest economies.

US and Chinese officials confirmed on Sunday that they had reached an initial consensus for Trump and President Xi Jinping to finalise during a meeting later in the week.

“I have a lot of respect for President Xi,” Trump told reporters after visiting Malaysia for a summit of Southeast Asian nations, where he reached preliminary trade agreements with Malaysia, Thailand, Cambodia, and Vietnam.

“I think we’re going to come away with a deal,” Trump said.

And investors see it as a strong signal. According to Stephen Innes of SPI Asset Management: “This isn’t just photo-op diplomacy. Behind the showmanship, Washington and Beijing’s top trade lieutenants have quietly mapped out a framework that might, just might, keep the world’s two largest economies from tearing up the field again.”

The enthusiasm brought about a shift in risk-taking among investors, demonstrated by a fall in gold futures. The safe-haven asset’s continuous contract fell by almost 2% on Monday morning, as an ounce was priced at $4,055.50.

The euro and Japanese yen remained flat against the US dollar. One euro was traded at $1.1638, while the greenback cost ¥152.8070. The British pound climbed 0.26% against the US dollar, and the rate was at $1.3345.

Crude oil prices fell after European markets opened, with both benchmarks trading nearly 1% lower. The US benchmark WTI crude’s price was $61.06 a barrel, and Brent was at $65.47.

In other dealings, leading cryptocurrencies were up. CoinDesk’s Bitcoin Price Index (XBX) gained 4.86% and climbed to $115,395.34. Ethereum cost $4,171.84, up by 4.82% on Monday morning in Europe.

Another Fed rate cut on the cards, coupled with Big Tech reports

Wall Street hit record highs on Friday, after lower-than-expected inflation numbers from the US fuelled further hope that the Federal Reserve is about to cut interest rates further this Wednesday.

The data on inflation was encouraging because it could mean less pain for lower- and middle-income households struggling with still-high increases in prices. Even more importantly for Wall Street, it could also clear the way for the Federal Reserve to keep cutting interest rates in hopes of giving a boost to the slowing job market.

The Fed just cut its main interest rate last month for the first time this year, but it’s been hesitant to promise more relief because lower rates can make inflation worse, beyond boosting the economy and prices for investments.

Meanwhile, a flood of big tech companies’ earnings is on its way this week, with Microsoft, Meta and Google-parent Alphabet reporting on Wednesday. Apple and Amazon’s numbers are due to be released on Thursday.

Better-than-expected profits could fuel hopes for steady growth in the US. Information is scarce about the current state of the world’s biggest economy due to the prolonged government shutdown.

Relations between the United States and China are tense, once again, with experts saying that the administration of US President Donald Trump “doesn’t quite know how to deal with China”.

The latest flare-up took place when Beijing, on October 9, expanded its restrictions on the export of rare-earth metals, increasing the number of elements on the list.

China has the largest reserves and the majority of processing facilities of rare-earth metals that are used in a range of daily and critical industries like electric vehicles, smartphones, laptops and defence equipment.

In a first, it also required countries to have a licence to export rare-earth magnets and certain semiconductor materials that contain even trace amounts of minerals sourced from China or produced using Chinese technology.

China’s actions on rare-earths also came after the US expanded its Entity List, a trade restriction list that consists of certain foreign persons, entities or government, further limiting China’s access to the most advanced semiconductor chips, and added levies on China-linked ships both to boost the US shipbuilding industry and loosen China’s hold on the global shipping trade. China retaliated by applying its own charges on US-owned, operated, built or flagged vessels.

“For the US, its actions on chip exports and shipping industry fees were not related to the trade deal with China,” said Vina Nadjibulla, vice president for research and strategy at the Asia Pacific Foundation of Canada.

Since then, the two countries have also been in an “information war”, said Nadjibulla, each blaming the other for holding the world hostage with its policies.

But beyond the rhetoric, the world is seeing China really up its game.

“For the first time, China is doing this extra-terrestrial action that applies to other countries as well [with its amped up export restrictions on rare-earths]. They are prepared to match every US escalation, and have the US back down,” Nadjibulla said. “This is a very different kind of a trade war than we were experiencing even three months ago.”

This was a “power play” by China in the run-up to a planned meeting later this month between Trump and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit in South Korea because “China has decided that the leverage is on their side,” said Dexter Tiff Roberts, a nonresident senior fellow at the Atlantic Council Global China Hub, pointing out that after some initial noise with Trump saying there was no reason to meet Xi any longer, the meeting is back on.

“If you look at the approach of the Trump administration right now, they are all over the place,” said Roberts.

Roberts was referring not only to the multiple tariff threats that the US has issued both on China and on specific industries and the carve-outs that were soon announced on those, but also in its statements on the Trump-Xi meeting, with Trump saying it was not happening, only to reverse that two days later.

“The Trump administration doesn’t quite know how to deal with China,” said Roberts. “They don’t understand that China is willing to accept a lot of pain,” and will not be easily cowed by US threats.

Beijing, on the other hand, has realised that Trump is determined to get his big deal with China and wants his state visit to seal that, maybe because “he feels that is important to his credentials as a big deal maker,” added Roberts, but that he cannot get there without giving more to China.

“China saw that they could push harder in the lead-up to the meeting.”

Wei Liang, a professor at the Middlebury Institute of International Studies who specialises in international trade and Chinese economic foreign policy, agrees.

“Trump has a track record of TACO,” she said, referring to a term coined by a Financial Times columnist in May, which stands for “Trump always chickens out” in reference to his announcing tariffs and then carving out exemptions and pushing out implementation dates.

“He cares more than any other US president [about] stock market reactions, so definitely will be more flexible to making concessions. This is the inconsistency that has been captured by his negotiation partners,” Liang said.

China’s defiant stance also comes at a time of its own political concerns, Liang added.

While the domestic economy is “a black box” with no reliable data available on growth, employment and other criteria, the consensus among China experts is that the country has been hit by the tariffs, economic growth has slowed, and unemployment has ramped up.

As China started its four-day fourth plenary session on Monday where it plans to approve the draft of its next five-year national economic and social development plan, Xi can use the moment to tell his domestic audience that the country’s problems are stemming from Trump’s policies and the whole world is suffering because of those tariffs and it’s not related to Chinese policies, Liang said.

A possible decoupling

All of this also signals that Beijing seems to be prepared to “decouple” from the US more than ever, a significant change in mentality, as, in the past, the standard response to the idea was that it would be a “lose-lose” situation for both countries, Liang told Al Jazeera.

But in the last few years, China has diversified its exports to other countries, especially those in its Belt and Road Initiative, the ambitious infrastructure project that it launched in 2013 to link East Asia through Europe and has since expanded to Africa, Oceania and Latin America.

Even when it comes to things that it needs from the US – soya beans, aeroplanes and high-tech chip equipment – it can find other suppliers or has learned to work around that need, as is the case for the chip equipment, Liang pointed out.

In the meantime, especially in the years since the US-China trade war started under Trump as president in his first term, China has brought in a set of national security laws – including its version of the US Entity List, through which it is setting limits on those exports, Nadjibulla said.

“Everybody should have been preparing the way the Chinese have been preparing. We breathed a sigh of relief when there was a change in government [in the US after the first Trump administration], but China kept preparing,” she said.

“This should be a wake-up call for all countries to find other sources for its needs. Everyone should be redoubling their efforts to diversify, because we have now seen the Chinese playbook.”

United States President Donald Trump has spent the better part of this week touting a TikTok “deal” with China, but experts say it is far from finalised after both sides shared details of his phone call with President Xi Jinping.

The two leaders spoke by phone on Friday, their first call in three months, but there was no announcement of the sale of the popular social media app that has 170 million US users.

While Trump, in a post after the call on Truth Social, said “It was a very good call … appreciate the TikTok approval”, the version from Beijing was not as clear.

“On TikTok, Xi said China’s position is clear: the Chinese government respects the will of firms and welcomes companies to conduct business negotiations on the basis of market rules to reach a solution consistent with Chinese laws and regulations while balancing interests,” according to the meeting summary in Xinhua, the Reuters news agency reported.

Experts were not surprised.

“Trump is the type of person who often announces frameworks or deals to have deals or a deal that still has a lot of details to be worked out, and this seems to be another example of that,” said Rachel Ziemba, adjunct senior fellow at the Center for a New American Security.

The bigger trade deal is likely to wait till Trump and Xi meet on the sidelines of the Asia-Pacific Economic Cooperation forum that starts on October 31 in Gyeongju in South Korea, “if that happens”, added Ziemba.

Despite the lack of any specific developments from Friday’s call, experts agree that the leaders talking is in itself a sign of a thaw, especially as Xi had previously refused to get on the phone with Trump, despite the multiple meetings in Geneva, London and most recently in Madrid.

“At least they have broken ice after a long while, and it seems like they are ready to negotiate other more difficult issues,” said Wei Liang, a professor at Middlebury Institute of International Studies, where she specialises in international trade and Chinese foreign economic policy, among other topics.

Some scholars, she said, had likened the last few months as worse than the peak of the Cold War between the US and the former Soviet Union, where leaders of the two countries at least had a hotline in place.

The call was days after Trump extended, for the fourth time, a deadline for China’s ByteDance to divest its ownership of TikTok or face a ban in the US under a law passed last year with overwhelming bipartisan support and one that was later upheld by the Supreme Court.

“It will be a very complicated transaction, if it happens,” said Robert Rogowsky, adjunct professor of trade and economic diplomacy at Georgetown University’s School of Foreign Service, both because Beijing is reluctant to exit the app and because of the lack of clarity of future owners and rules around that.

“The value of TikTok is the algorithm which selects for us what we want to see, but in a way that is remarkably controlling,” said Rogowsky.

While the focus in debates on TikTok’s ownership has centred around data security, the real problem, instead, is its “ability to influence” viewers through the algorithm, said Rogowsky.

“Think about the power that would confer on the owners, the power of that incredibly sophisticated algorithm that drives people’s viewing, when that is under the control of a political party or groups [aligned with one], gives them tremendous power to influence.”

Middlebury’s Liang adds that it is unlikely that China would let go of the algorithm and expects “a graceful exit” that would allow both the US and China to get what they want from this deal.

China’s ‘stronger, bolder stand’

Any hammering out of a bigger trade deal on the multiple other issues, including US access to rare earth metals and China’s purchase of Russian oil and access to US semiconductor chips, will have to wait for the two leaders to meet, experts say.

“What is clear is that Trump himself is not in a space to impose new tariffs on China, and that is a reflection of the fact that the US government has mixed interests with respect to China, and the Chinese control some very important choke points,” said Ziemba, referring to China’s hold over critical minerals.

Rogowsky agrees that “China is taking a much stronger, bolder stand with regard to the US, partly because that’s the China way.”

But it is also likely that Beijing has some justification for that confidence, he said, referring to Beijing’s directive to businesses to avoid buying chips from US chip giant Nvidia.

“While US is trying to control what sort of chips go to China, they have declined to buy those, probably because they have the technology to design equally good or better and cheaper chips,” he said. Plus, with US dependence on Chinese rare earth metals, Beijing is “feeling strong enough to confront the US”.

US and Chinese presidents to discuss deal to keep popular social media app online in US, trade relations.

Resource competition has intensified between the two great powers, the US and China, due to trade and tariff wars. Recently, both the countries have made major policy shifts in the strategically significant rare earth sector.

China discreetly issued 2025 rare earth mining and smelting quotas to its state-owned enterprises, exhibiting deepening securitization of this sector. The Ministry of Industry and Information Technology (MIIT) previously used to make the announcement public on their website.

The Pentagon became the largest shareholder in MP Materials after buying $400 million worth of stocks. It indicates expanding involvement of the US government in the domestic rare earth industry since MP Materials operates the sole mining facility in the US. This move faces severe backlash, with critics comparing it with China’s approach to market intervention.

Consequently, China has intensified its efforts to maintain overarching dominance over the global rare earth market, and the US strives to claw back its control over strategically important raw materials.

Quick guide to rare earth complexities

Rare earth elements (REEs) are a group of seventeen metallic elements. Their requirement in high-tech applications in medicine, the military, and green technologies is indispensable. The REEs are not so rare, as the name suggests. Yet the real limitation lies in locating them in clusters for economic viability. All the more difficult is smelting, separating, and processing these elements.

China is the net importer of REEs, mining 70%, with the rest being extracted by Myanmar, Australia, and the United States. However, China enjoys a near-monopoly in processing 90% of the rare earths globally.

Over the years, China has built self-sustaining rare earth supply chains domestically. That implies managing upstream extraction to midstream processing and, to a greater extent, even downstream manufacturing.

Just as access to oil shaped global geopolitics during the last century, access to rare earths is shaping current geopolitics in this great power competition. And China is weaponizing its preeminence over REE supply chains by tightening its control to offset the US.

China’s control over rare earths came with a huge brunt.

China discovered the strategic value of REEs in the formative years of building the country’s economic base. China has been investing heavily in the R&D since the discovery of rare earth deposits in Bayan Obo, Inner Mongolia, in 1927. Today, it holds the rank of largest known deposit of REEs and constitutes over 90% of China’s entire reserves.

Deng Xiaoping’s signature policy of 1978 is credited for kick-starting the opening up of the Chinese economy and integrating China into the global market. As a cherry on top for Chinese authorities came the “environmental decade” in the 1970s in the United States, marked by dozens of environmental legislations.

Rare earth extraction and processing have severe environmental repercussions. Certainly, US private firms were in search of a scapegoat to outsource environmental costs and exploit cheap labor.

Chinese authorities were willing to face the brunt of ecological damage for speedy economic growth. It turned out that the short-term economic interests overshadowed the long-term strategic interests of America. 

What exacerbated the matter was illegal and unregulated mining of rare earths. The parallel economy flourished as global consumption for rare earth multiplied year on year. Chinese authorities have taken cognizance but struggle to put a stop to these activities.

China has doubled down on its efforts to curb unlicensed extraction and harden the compliance systems facing immense pressure from Trump’s tariff war.

Chinese market manipulation tricks came in handy.

By the 1990s, bifurcating prices of rare earths for the Chinese domestic market and international market had compelled many US businesses to shut down.

China carried out price manipulation in two tiers. First, it made sure to service its domestic needs by selling at cheaper rates than the products that were being exported. Second, pricing it underneath the other global firms in the international market but higher than the domestic price levels.

In the beginning, this created incentive for international companies to establish their manufacturing units in China. But eventually almost all firms went bankrupt, losing their competitive edge against Chinese SOEs.

In addition, China has been consolidating its rare earth assets to raise its global competitiveness and pricing power. In Dec 2021, three mega SOEs were merged to form a megafirm, China Rare Earth Group. Today, only two mega conglomerates are operating: China Rare Earth Group and China Northern Rare Earth Group. In fact, export quotas are entrusted to only these two mega firms.

Export quotas introduced in 1999 have expanded and tightened over the years. Though year-wise mining and smelting quotas have increased, the annual growth rates see a downturn. This time not disclosing the quotas publicly for ‘security reasons’ will exacerbate uncertainties in the international market. It seems like a calculated strategy of Chinese authorities to maintain their stronghold over the global market of rare earths but making sure to provide enough to maintain dominance.

Some scholars do articulate China’s policies to clamp down on its rare earth industry from a different lens, essentially, to address domestic interests. The Chinese authoritarian state is caught up in securing control and increasing production efficiency.

Trump responding vigorously to counterbalance Chinese dominance

The Pentagon becoming the largest stakeholder of MP Materials to cushion a strategic sector is nothing unusual. The US government and its agencies have a history of getting involved in sectors of national and economic significance. This underscores the fact that great powers have historically used market distortions as a tool to uphold their supremacy.

Establishing a cutting-edge supply chain with like-minded states would take over a decade and cost well over a trillion dollars in that period. Americans have to catch up on the long road ahead that the Chinese took decades to build. Therefore, Trump initiated the first-of-their-kind policy measures to hasten up the catching-up process. These policy initiatives are aimed at enhancing collaboration for clean energy technologies, building resilient supply chains, and reducing dependencies.

On April 30, 2025, the US and Ukraine signed a long-awaited minerals deal. Trump’s ambition to gain control over Greenland, a strategically located island in the Arctic, to the extent of using military force wasn’t just about national security. Rather driven by desire to control rich untapped resources, including rare earth minerals, copper, gold, uranium, iron, oil, etc.

Trump’s efforts will take years to bear fruit. Prior to that, the US must build an investment-friendly environment. A report by consultancy S&P Global found that on average it takes nearly 29 years to build a new mine for the critical minerals in the US, the second-longest in the world. The process to obtain a mining permit is lengthy and confusing, which harms efforts to counterbalance China’s near-dominant positioning.

world of weaponized interdependence

Henry Farrell and Abraham Newman argue cold war animosity was replaced by a new world of networks that accentuated harmonious relationships. They suggest countries are more entwined than ever, but rather than easing hostilities, interdependence is used by states against their adversaries.

Great power competition is being increasingly impacted by what they called “weaponized interdependence.” China’s dominance over the supply lines of rare earths gives it the edge to fight this battle for long.

President Donald Trump has unveiled new reciprocal tariffs on imports from dozens of countries, ranging from 10 percent to 41 percent, forging ahead with his efforts to reshape international trade.

On Thursday, the White House issued a statement entitled “Further Modifying the Reciprocal Tariff Rates”, in which some 69 trading partners and their respective “adjusted” tariff rates were listed.

These are changes to import levies since the tariffs announced on April 2 (and later paused until August 1), the day Donald Trump referred to as “Liberation Day”. Rates have dropped for most countries, but not all. Most of the new tariffs will go into effect on August 7.

Imports from roughly 40 countries will face a new 15 percent rate on goods they export to the United States, while other nations’ products will be hit with higher duties. The United Kingdom and Australia will pay 10 percent.

One notable exception from Trump’s latest tariff list is China, the US’s third-largest trading partner. So, what’s the current state of play between the two countries?

How are US-China trade talks going?

Top officials from the US and China failed to agree on extending a 90-day pause on tariffs on Tuesday during the latest round of talks held in Stockholm, Sweden.

Any renewal of the pause, which is due to expire on August 12, will ultimately be up to Trump, US Treasury Secretary Scott Bessent said.

The talks, which took place in Rosenbad, the seat of government where the Swedish prime minister’s office is located, were aimed at defusing a new trade spat between the world’s two biggest economies.

The latest meeting, which was attended by Bessent and Vice Premier He Lifeng for Beijing, concluded just two days after Trump announced a new trade deal with the European Union.

It was the third meeting between the US and China since April, at which point the two sides had slapped each other with tariffs exceeding 100 percent in an escalating trade war.

On May 12, the two agreed a 90-day tariff pause in Geneva, easing a costly logjam which had upended trade. During the pause, US tariffs have been reduced from 145 percent to 30 percent, and Chinese duties from 125 percent to 10 percent.

But without a new trading agreement in place, global supply chains could face renewed turmoil if US and Chinese tariffs restart at triple-digit levels that would amount to a bilateral trade embargo.

What happened at the Stockholm meeting?

After the meeting, China’s deputy commerce minister, Li Chenggang, said both sides were “fully aware of the importance of safeguarding a stable and sound China-US trade and economic relationship”.

He told Chinese media that the two sides had held “candid and constructive exchanges”.

For his part, Bessent told reporters at a briefing on Tuesday that the US had built momentum with recent US agreements with Japan and the EU. He remained sanguine about China.

“Just to tamp down that rhetoric, the meetings were very constructive. We just haven’t given the sign off,” he said.

Bessent stressed that “nothing is agreed until we speak with President Trump”.

The treasury secretary and US Trade Representative Jamieson Greer were due to brief Trump on Wednesday about the Stockholm discussions, he added.

Bessent also said that, given US secondary tariff legislation on sanctioned Russian oil, China could face high tariffs if Beijing continued with its Russian oil purchases. 

Similarly, the US recently announced an unspecified penalty for India’s purchase of Russian oil, on top of a 25 percent tariff on Indian exports.

What are the central issues in the trade talks?

Technology exports, specifically chips used for artificial intelligence, are understood to have been at the centre of this week’s talks. In particular, US security officials have raised concerns that high-tech American semiconductor chips could be used by China’s military.

In April, Trump was poised to block the export of Nvidia’s H20 chip, which has been designed to comply with Biden-era export curbs. But Trump reversed course following direct appeals from Nvidia Chief Executive Officer Jensen Huang.

In the run-up to this week’s talks, the UK’s Financial Times newspaper reported that Washington had frozen restrictions on technology sales to China to ease negotiations and to avoid retaliation from Beijing in the form of export restrictions on rare earth minerals, as happened in May.

Rare earths are a group of 17 elements essential to numerous manufacturing industries, from auto parts to clean energy technology to military hardware. They are also a central issue for trade talks.

China has long dominated the mining and processing of rare earth minerals, as well as the production of related components, like rare earth magnets.

China’s hold over the industry has been a key concern for US trade representatives since Donald Trump’s return to the White House.

What was the state of US-China trade before the recent truce?

For years, Trump has criticised Beijing for what he deems to be unfair trade practices – namely, import quotas, government subsidies and tax breaks. He has even argued that the US’s trade deficit with China, which snowballed to $20 trillion between 1974 and 2024, constitutes a national emergency.

When Trump paused reciprocal tariffs on dozens of countries on April 9, he made an exception for China. Beijing, in turn, retaliated with import levies of its own.

Tit-for-tat exchanges quickly snowballed into eye-watering sums. By April 11, US tariffs on Chinese goods had reached 145 percent, while duties on US products entering China had swelled to 125 percent.

Tensions were defused in May, when Bessent and He Lifeng agreed to a truce which slashed respective tariffs by 115 percentage points for three months.

For now, US duties on Chinese products are set at 30 percent while China’s tariffs on the US have dropped to 10 percent.

What will happen next?

This week’s talks may pave the way for a potential meeting between Donald Trump and Chinese President Xi Jinping later in the year, although on Tuesday, Trump denied going out of his way to seek one.

For Thomas Sampson, a professor of economics at the London School of Economics, a face-to-face meeting has “the potential to be significant”. Equally though, it could be “a grip-and-grin style summit, where nothing substantive is discussed”, he told Al Jazeera.

Sampson added that US-China negotiations are more complex than those with other Asian countries, owing to China’s grip on rare earth minerals, in addition to the fact that China “has long been a target of Trump’s”.

For now, Sampson said he believes that the “mood around the [Sweden] talks seems more positive than earlier this year. Both sides, it seems, have stepped back from the brink”. His expectation is for a “more restrained trade war” than before, if one is to resume.

On Friday, White House press secretary Karoline Leavitt said trade talks with China were “moving in the right direction” and that Washington remains in “direct communication” with Beijing.

What other trade deals has Trump concluded in recent weeks?

On top of Trump’s Thursday tariff blitz, the latest US-China talks come after Washington struck deals with both the EU and Japan last week.

Last Sunday, Trump and European Commission President Ursula von der Leyen announced a trade agreement, ending a months-long standoff between two economic giants.

The EU accepted a 15 percent tariff on most of its exports, while the bloc’s average tariff rate on US goods will drop below 1 percent once the deal goes into effect.

Brussels also said it would purchase $750bn in American energy products and invest $600bn more into the US, on top of existing commercial agreements.

France’s Prime Minister Francois Bayrou said the EU had capitulated to Trump’s trade threats, labelling the deal struck on Sunday as a “dark day” for the EU.

Elsewhere, the US has also struck tariff deals with South Korea, Indonesia, Vietnam and the Philippines.

The United States and China say they’ve reached in principle a framework to roll back some of the punitive measures they have taken against each other’s economies.

That means Washington could ease restrictions on selling chips to China if Beijing agrees to speed up the export of rare earths.

Whether that happens depends on the approval of presidents Donald Trump and Xi Jinping.

The plan reached after talks in London marks the latest twist in a trade war that has threatened to disrupt global supply chains.

Also, what’s behind the surge in Russia’s rouble?

Plus, are nations choosing warfare over welfare?

Published on
10/06/2025 – 7:36 GMT+2

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Asian shares were marginally higher on Tuesday as investors kept an eye on US-China trade talks that might help stave off a recession.

Tokyo’s Nikkei 225 gained 0.9% to 38,445.68, while the Kospi in South Korea jumped 0.3% to 2,865.12.

Hong Kong’s Hang Seng edged 0.3% higher, to 24,261.26 and the Shanghai Composite index was up 0.1% at 3,403.52. In Taiwan, the Taiex surged 2.1% to 22.253,46.

Australia’s S&P/ASX 200 advanced just less than 0.9% to 8.588,10.

On Monday, the S&P 500 edged up just 0.1% and at 6,005.88 is within 2.3% of its record set in February. The Dow Jones Industrial Average slipped by 1 point, which is well below 0.1%, to 42,761.76.

The Nasdaq composite added 0.3% to 19,591.24.

A second day of talks between the US and China was planned after the two global powers met in London for negotiations.

The hope is that they can eventually reach a deal to reduce painfully high tariffs against each other. Most of the tariff hikes imposed since US President Donald Trump escalated his trade war have been paused to allow trade in everything from tiny tech gadgets to enormous machinery.

Hopes that President Donald Trump will lower his tariffs after reaching trade deals with countries around the world have helped the S&P 500 win back gains after it dropped roughly 20% from its record two months ago. The index is back above where it was when Trump shocked financial markets in April with his wide-ranging tariff announcement on so-called “Liberation Day”.

Some of the market’s biggest moves came from the announcement of big buyout deals. Qualcomm rallied 4.1% after saying it agreed to buy Alphawave Semi in a deal valued at $2.4bn (€2.1bn). IonQ, meanwhile, rose 2.7% after the quantum computing and networking company said it agreed to purchase Oxford Ionics for nearly $1.08bn (€947.1mn).

On the losing side of Wall Street was Warner Bros. Discovery, which flipped from a big early gain to a loss of 3% after saying it would split into two companies. One will get Warner Bros. Television, HBO Max and other studio brands, while the other will hold onto CNN, TNT Sports and other entertainment, sports and news television brands around the world, along with some digital products.

Tesla recovered some of its sharp, recent drop. The electric vehicle company tumbled last week as Elon Musk’s relationship with Trump broke apart, and it rose 4.6% on Monday after flipping between gains and losses earlier in the day.

The frayed relationship could end up damaging Musk’s other companies that get contracts from the US government, such as SpaceX. Rocket Lab, a space company that could pick up business at SpaceX’s expense, rose 2.5%.

In the bond market, the yield on the 10-year Treasury eased to 4.48% from 4.51% late Friday. It fell after a survey by the Federal Reserve Bank of New York found that consumers’ expectations for coming inflation eased slightly in May.

Economists expect a report due on Wednesday to show that inflation across the country accelerated last month to 2.5% from 2.3%.

The Federal Reserve has been keeping its main interest rate steady as it waits to assess the inflationary effects of Trump’s tariffs. A persistent increase in inflation expectations among US households could drive behaviour that creates a vicious cycle that only worsens inflation.

In other dealings early on Tuesday, US benchmark crude oil picked up 31 cents to $65.45 per barrel. Brent crude, the international standard, also gained 31 cents, to $67.35.

The dollar rose to 144.93 Japanese yen from 144.61 yen. The euro slipped to $1.1399 from $1.1421.

Top US and Chinese officials are meeting in London in a bid to defuse trade tensions over rare earth minerals and advanced technology after a phone call between Presidents Donald Trump and Xi Jinping last week.

The two sides are aiming in Monday’s talks to build on a preliminary trade deal struck in Geneva in May, which briefly lowered the temperature between Washington and Beijing and offered relief for investors battered by months of Trump’s global trade war.

Since then, the agreement to mutually suspend most of the 100 percent-plus tariffs for 90 days has been followed by barbs and accusations from both sides.

But after reaching a tentative understanding with Xi on resuming the flow of critical minerals, Trump said on Thursday that he expected Monday’s meeting to go “very well”.

Who is leading the US and Chinese delegations?

The US delegation in London is headed by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer. The Chinese contingent will be led by Vice Premier He Lifeng.

The venue of the meeting has not been disclosed.

What happened during last week’s call between Xi and Trump?

Monday’s meeting comes four days after Trump and Xi spoke by phone, their first direct interaction since Trump’s January 20 inauguration.

After the more than hourlong call on Thursday, Trump said the conversation was focused on trade and had resulted in a “very positive conclusion” for both countries.

In the first readout of the call, Trump posted on his social media site, Truth Social: “I just concluded a very good phone call with President Xi, of China, discussing some of the intricacies of our recently made, and agreed to, Trade Deal.”

“There should no longer be any questions respecting the complexity of Rare Earth products. Our respective teams will be meeting shortly at a location to be determined. During the conversation, President Xi graciously invited the First Lady and me to visit China, and I reciprocated,” he added.

For his part, Xi was quoted by Chinese state TV as saying after the call that the two countries should strive for a win-win outcome and dialogue and cooperation are the only right choice for both.

In recent weeks, both sides have accused the other of breaching their deal made in Geneva and aimed at dramatically reducing tariffs – an agreement Trump touted as a “total reset” after he announced tariffs on all US trading partners on April 2.

The tentative truce struck on May 11 in Geneva brought US tariffs on Chinese products down from 145 to 30 percent while Beijing slashed levies on US imports from 125 to 10 percent.

The agreement gave both sides a three-month deadline to try to reach a more lasting deal.

In what ways have US export controls played a role?

Renewed tensions between the US and China began just one day after the May 12 announcement of the Geneva agreement to temporarily lower tariffs.

The US Department of Commerce issued guidance saying the use of Ascend artificial intelligence chips from Huawei, a leading Chinese tech company, could violate US export controls.

The agency warned companies “anywhere in the world” against using AI chips made by Huawei, claiming they illegally contained, or were made with, US technology.

Beijing publicly criticised Washington’s move to limit access to American technology, accusing the US of trying to stymie China’s ability to develop cutting-edge AI chips.

On May 15, Chinese Ministry of Commerce spokesperson He Yongqian accused the US of “abusing export control measures”, adding that China would take steps to defend its business interests.

Lutnick wasn’t in Geneva last month, but he is a lead negotiator in Monday’s talks in London. His Commerce Department oversees export controls for the US, and some analysts believe his participation is an indication of how central the issue has become for both sides.

China issuing rare earth licences to US companies

In response to Trump’s April 2 tariff announcement, Beijing suspended exports to all countries of six heavy rare earth metals and associated magnets on April 4.

The move upended global supply chains central to automakers, aerospace manufacturers and military contractors.

China produces 90 percent of the world’s rare earth minerals, which are essential components in permanent magnets – used in a swath of high-tech applications.

Without mentioning rare earths specifically, Trump took to social media last month to attack China’s trade restrictions.

“The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,” Trump posted on Truth Social on May 30.

After Xi and Trump’s phone call last week, however, the Chinese government hinted that it is addressing US concerns, which have also been echoed by some European companies.

On Saturday, China’s Commerce Ministry said it had approved some rare earth exports, without specifying which countries were involved.

It issued a statement saying it had granted some approvals and “will continue to strengthen the approval of applications that comply with regulations”.

On Monday, the rare earth suppliers of three big US automakers – General Motors, Ford and Stellantis – got clearance from Beijing for a handful of export licences.

Washington wants access to as many rare earths as quickly as possible, Kevin Hassett, head of the National Economic Council at the White House, said on the CBS TV network’s Face the Nation programme on Sunday.

“We want the rare earths, the magnets that are crucial for cellphones and everything else to flow just as they did before the beginning of April, and we don’t want any technical details slowing that down,” Hassett said.

What challenges remain?

Student visas don’t normally figure in trade talks, but a recent US announcement that it would begin revoking the visas of Chinese students has emerged as another flashpoint between Washington and Beijing.

On May 28, US Secretary of State Marco Rubio said the Trump administration would begin to “aggressively” revoke the visas of Chinese university students.

He also said the US would revise visa criteria to enhance scrutiny of all future visa applications from China and Hong Kong.

China is the second largest country of origin for international students in the US after India.

More than 270,000 Chinese students studied in the US in the 2023-2024 academic year.

Beijing’s Ministry of Foreign Affairs spokesperson Mao Ning criticised Washington’s decision to revoke the visas, saying it “damaged” the rights of Chinese students.

Other concerns continue to strain the bilateral relationship from the illicit fentanyl trade to the status of democratically governed Taiwan and US complaints about China’s state-dominated economic model.

Still, Trump’s geopolitical bluster goes well beyond China. While promising to reshape relationships with all US trading partners, Trump so far has reached only one new trade agreement – with the United Kingdom.

Trump’s reduction of US tariffs on Chinese goods runs out in August unless he decides to extend it. If deals aren’t reached, the White House said Trump plans to restore tariff rates to the levels he first announced in April.

Published on
02/06/2025 – 13:29 GMT+2

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At the time of writing (13:05 CEST), all major European indexes were in the red after China said the US “severely violated” the terms of their recent trade agreement. Market participants also considered the impact of US President Donald Trump’s plan to double current tariffs on steel and aluminium from 25% to 50% from this Wednesday.

The EURO STOXX 50 was down 0.68%, Germany’s DAX fell 0.48%, while France’s CAC 40 declined 0.63%.

“Donald Trump has upset markets once again,” Russ Mould, investment director at AJ Bell, said in an email note sent to Euronews.

“Doubling import taxes on steel and aluminium, and aggravating China once again, mean we face a situation where uncertainty prevails. Trump’s continuous moving of the goal posts is frustrating for businesses, governments, consumers and investors.

“Equity markets were down across Europe and Asia, with futures prices implying a similar pattern when Wall Street opens for trading on Monday. Unsurprisingly, gold got a boost as investors returned to safe-haven assets.”

US markets end May on flat note

Meanwhile, US markets ended May on a flat note, although for the month as a whole each of the main indices rose strongly following hopes of tariff reconciliations.

“Such optimism will face an immediate challenge as June begins, with comments over the weekend keeping the aggressive rhetoric in place. The latest broadsides from the White House were primarily directed at China and the EU, with both threatening a response in kind to any further tariff hikes,” Richard Hunter, head of markets at Interactive Investor, said in an email note to Euronews.

However, he noted, back on the ground, there were some promising economic signs with the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures index coming in lower than expected and with a consumer sentiment index showing higher than had been feared.

“However, such respite could prove short-lived as the latter was largely predicated on an apparent softening of hostilities between the US and China in the latter part of the month, which has since evaporated. There will be a further signal on the state of the economy at the end of the week, with non-farm payrolls expected to show that 130,000 jobs will have been added in May compared to 177,000 the previous month and that the 4.2% unemployment rate will remain unchanged.

“In the meantime, US markets have repaired much of the damage wrought over the last few months although sentiment remains fragile. The Dow Jones and Nasdaq are down by 0.6% and 1% respectively in the year-to-date, while the 0.5% gain for the benchmark S&P500 has in part been driven by a resurgence of the mega cap technology trade,” Hunter said.

Asia markets under pressure

In addition to contending with the weekend comments, Asian markets fell foul of geopolitical uncertainty following the latest Russia-Ukraine developments, with the Hang Seng under pressure based on the renewed likely tariff hikes on aluminium and steel.

“Mainland China was closed for a public holiday, which could leave some losses being stored up ahead of its reopening, likely exacerbated by a report which showed a further contraction in factory activity over the last month,” Hunter added.

US Secretary of State Marco Rubio’s salvo against Chinese students, promising to “aggressively revoke” their visas, is the latest move in heightening tensions between the world’s two largest economies.

Despite a temporary tariff truce reached between them earlier this month, divisions between Washington and Beijing remain wide, with recent ruptures over higher education, artificial intelligence (AI) chips and rare earth minerals.

Here’s all we know about how relations between China and the United States are worsening despite diplomatic efforts.

What did the US and China agree on tariffs?

A US-China trade spat escalated after Trump’s administration raised tariffs on Chinese goods to 145 percent earlier this year, with cumulative US duties on some Chinese goods reaching a staggering 245 percent. China retaliated with 125 percent tariffs of its own on US goods.

Under an agreement reached on May 12 following two days of trade talks in Geneva, tariffs on both sides were dropped by 115 percentage points for 90 days, during which time negotiators hope to secure a longer-term agreement. For now, the US has maintained a 30 percent tariff on all Chinese goods while Beijing has a 10 percent levy on US products.

In the weeks since the temporary reprieve, however, Washington and Beijing appear to have had only limited discussions.

On Thursday, US Treasury secretary Scott Bessent told Fox News that trade talks between the US and China are “a bit stalled”, and may need to be reinvigorated by a call between US President Donald Trump and Chinese leader Xi Jinping.

In the meantime, the Trump administration has announced new, strict visa controls on Chinese university students and told US companies to stop selling their advanced chip software used to design semiconductors to Chinese groups.

Why is the US targeting Chinese students?

On Wednesday, Rubio announced that the US will “aggressively revoke” the visas of Chinese students studying in the country. He also pledged to ramp up scrutiny of new visa applicants from China and Hong Kong.

The Trump administration’s decision to carry out deportations and to revoke student visas is part of wide-ranging efforts to fulfil its hardline immigration agenda.

China is the second-largest country of origin for international students in the US, behind India. Chinese students made up roughly a quarter of all foreign students in the US during the 2023-2024 academic year – more than 270,000 in total.

China’s Ministry of Foreign Affairs criticised the decision to revoke visas, saying it “damaged” the rights of Chinese students. “The US has unreasonably cancelled Chinese students’ visas under the pretext of ideology and national rights,” Foreign Ministry spokesperson Mao Ning said.

The Trump administration also banned Harvard University from enrolling any foreign students on May 22, accusing the institution of “coordinating with the Chinese Communist Party”. That move has since been blocked by a US federal judge.

Still, the largest portion of foreign students at Harvard – almost 1,300 – are Chinese, and many top officials, including the current leader Xi Jinping, have sent their children to the Ivy League school.

How is the US taking aim at Chinese semiconductors?

On May 13, just after the end of trade talks in Geneva, the US Commerce Department issued guidance warning American firms against using Huawei’s Ascend AI semiconductor chips, stating that they “were likely developed or produced in violation of US export controls”. 

The move marked the latest in a series of efforts by the Trump administration to stymie China’s ability to develop cutting-edge AI chips. The tiny semiconductors, which power AI systems, have long been a source of tension between the US and China.

China’s Commerce Ministry spokesperson fired back against the guidance last week, accusing Washington of “undermining” the consensus reached in Geneva and describing the measures as “typical unilateral bullying and protectionism”.

Then, on May 28, the US government ramped up the row by ordering US companies which make software used to design semiconductors to stop selling their goods and services to Chinese groups, The Financial Times reported.

Design automation software makers, including Cadence, Synopsys and Siemens EDA, were told via letters from the US Commerce Department to stop supplying their technology to China.

Why is the US targeting Chinese semiconductors?

The US has been tightening its export controls on semiconductors for more than a decade, contending that China has used US computer chips to improve military hardware and software.

Chinese officials and industry executives deny this and contend that the US is trying to limit China’s economic and technological development.

In his first term as president, Trump banned China’s Huawei from using advanced US circuit boards.

Huawei is seen as a competitor to Nvidia, the US semiconductor giant which produces its own-brand of “Ascend” AI chips. In April, Washington restricted the export of Nvidia’s AI chips to China.

But Nvidia’s chief executive, Jensen Huang, recently warned that attempts to hamstring China’s AI technology through export controls had largely failed.

How could China be affected by US measures?

The suspension of semiconductor sales will limit supplies for aerospace equipment needed for China’s commercial aircraft, the C919, a signature project in China’s push towards economic and transport self-reliance.

Christopher Johnson, a former CIA China analyst, told The Financial Times that this week’s new export controls underscored the “innate fragility of the tariff truce reached in Geneva”.

“With both sides wanting to retain and continue demonstrating the potency of their respective chokehold capabilities, the risk the ceasefire could unravel even within the 90-day pause is omnipresent,” he added.

Will China ease restrictions on rare earth minerals exports?

US officials had expected the Geneva talks to result in China easing its export restrictions on rare earth elements. So far, there have been few signs of that, however.

Rare earth minerals are a group of precious minerals required to manufacture a wide range of goods in the defence, healthcare and technology sectors.

Rare earth metals, which include scandium and yttrium, are also key for producing components in capacitors – electrical parts which help power AI servers and smartphones.

China processes some 90 percent of the world’s rare earth minerals and instituted export controls in April to counter Trump’s “Liberation Day” tariffs in April, triggering alarm among US companies.

Last week, for instance, Ford temporarily closed a factory in Chicago which makes utility vehicles after one of its suppliers ran out of a specialised rare earth magnet.

In most new cars, especially elevate vehicles (cars with robotic technology allowing them to “climb” over obstacles), these high-tech magnets are used in parts which operate brake and steering systems, and power seats and fuel injectors.

The restrictions on the supply of rare earth minerals provide Beijing with a strategic advantage in future negotiations, as it can limit supplies of crucial technologies for US industry.

The world’s two biggest economies have stepped back from the brink.

After imposing retaliatory tariff hikes at rates never seen before, the United States and China have agreed to a truce.

US taxes on Chinese goods will now fall from 145 percent to 30 percent, and China will cut theirs on US items from 125 percent to 10 percent.

Some of the levies have been scrapped altogether while others have been put on hold.

After weeks of considerable strain, many people are looking to see how global supply chains will be affected.

Is it the end of the global trade war, triggered last month by US President Donald Trump?

And what does it mean for those countries who had been anticipating big investments due to the steep duties on China?

Presenter: Elizabeth Puranam

Guests:

William Lee, chief economist, Milken Institute

Huiyao Wang, founder, Center for China and Globalization

Jayant Menon, former lead economist, Asian Development Bank