Major breakthrough in China-US trade! Trump's tariff threat works, rare earth export controls postponed for one year.

U.S. and China trade negotiation representatives stated on Sunday that both sides have reached a framework agreement on Trump tariffs and other issues, with leaders of both countries expected to meet this week. U.S. Trade Representative Jamison Greer said both sides are finalizing the details of the final agreement and discussing an extension of a series of tariff ceasefire agreements reached this year. U.S. Treasury Secretary Basent revealed that the threat of 100% Trump tariffs forced China to agree to delay for a year the implementation of rare earth export controls, and the negotiation framework includes agricultural product purchases and fentanyl-related tariffs.

Kuala Lumpur negotiations achieve a framework breakthrough

(Source: New York Times)

Negotiators attended the ASEAN meeting in Kuala Lumpur, and U.S. President Trump also began his nearly week-long tour of Asia. “We are finalizing the details of the final agreement so that the two national leaders can review and decide whether to jointly complete this agreement,” U.S. Trade Representative Jamison Greer told reporters. He also mentioned that both sides discussed the possibility of extending the series of Trump tariff ceasefire agreements reached this year.

China's chief trade negotiator Li Chenggang stated that the two sides have had “in-depth and candid discussions” regarding the China-U.S. trade agreement and mentioned that they have reached a “preliminary consensus.” According to the Chinese side, the topics discussed in Kuala Lumpur include bilateral trade, export controls, extending the suspension period for reciprocal tariffs, fentanyl tariffs, and law enforcement cooperation.

Core Negotiation Issues:

Trump Tariff Truce Extended: Both sides discuss extending the tariff suspension agreement reached this year.

Rare Earth Export Controls: China agrees to postpone implementation for one year to avoid 100% tariffs from the United States.

Agricultural Product Procurement: China has committed to increasing imports of American agricultural products.

Fentanyl Cooperation: Strengthen law enforcement cooperation and adjust related tariffs.

Shipping Tariffs: Discussion on US port fees and China's retaliatory tariff issues.

Griel stated that the negotiations also involved rare earth metals—most of which are produced by China, and Beijing has implemented strict export controls on them this year. “We discussed extending the trade truce, and of course, we talked about rare earths, we covered a wide range of topics,” he said. This wide array of issues indicates that this round of Sino-U.S. trade negotiations is trying to address multiple long-standing points of contention in a comprehensive manner, rather than focusing solely on a single issue.

Trump tariffs 100% successfully threatened to obtain concessions

U.S. Treasury Secretary Becerra stated in an interview with ABC's “This Week” that he expects President Trump and Chinese leaders to have a “great meeting” later this week in South Korea. He mentioned that the framework protocol reached by U.S.-China officials, which includes agricultural product purchases and fentanyl-related tariffs, will serve as a kind of “warm-up” for this meeting.

“The president warned China that if it implements global export controls on rare earths, he will impose a 100% Trump tariff, which gives me the greatest bargaining chip,” said Benset. “It now seems that this threat has been defused, and the tariff measures can be avoided.” This statement reveals the core strategy of the Trump administration in the China-U.S. trade negotiations: to exert pressure through extreme tariff threats, forcing China to make concessions on key issues.

When asked about the concessions China is willing to make regarding rare earth minerals, Bessent stated that he expects China to “postpone the implementation of these measures for a year while reevaluating relevant policies.” This one-year delay provides a buffer period for both sides and offers U.S. companies a window to adjust their supply chains. For the U.S. defense and high-tech industries, which are highly dependent on Chinese rare earths, this one-year postponement could be a critical strategic opportunity.

The effectiveness of Trump's tariff threats has been reaffirmed in this round of China-U.S. trade negotiations. Since Trump's first term, he has repeatedly shown a willingness to use extreme tariffs as a negotiating tool, and the Chinese government has gradually realized that these threats are not mere bluster. A 100% tariff means that the price of Chinese goods will double, which is catastrophic for Chinese exporters who heavily rely on the U.S. market. In the face of this threat, China has chosen to make concessions on the rare earth issue, demonstrating its priority to protect exports to the U.S. rather than sticking to its rare earth control policies.

Strategic Importance of Rare Earth Export Controls

Rare earth metals are crucial for various advanced manufacturing, including automobiles, semiconductors, drones, industrial robots, offshore wind turbines, as well as the production of missiles, fighter jets, tanks, and other military equipment. China produces 90% of the world's refined rare earths and rare earth magnets, and in certain categories of rare earths needed for cutting-edge technologies and military applications, China even accounts for as much as 100% of the output.

Since April 4, the Ministry of Commerce of China has significantly restricted the export of rare earths and rare earth magnets to countries around the world. On October 9, the ministry issued further export control regulations, which are set to take effect on November 8 and December 1. These regulations will limit the cross-border transportation of products containing Chinese rare earth magnets and will also restrict the export of equipment needed to manufacture electric vehicle batteries—an industry where China is also trying to maintain its global technological leadership.

The new regulations will also restrict the export of important equipment used for manufacturing semiconductors and solar panels, such as diamond saw blades. Trump's tariff threat indicates that if Beijing pushes forward with these export controls, a 100% tariff will be imposed on goods from China. This strategy of countering export controls with tariffs reflects that the China-U.S. trade conflict has escalated from a simple trade imbalance issue to a comprehensive competition for strategic resources and technological dominance.

China's control over rare earth exports is not a new issue, but the scope and intensity this time are unprecedented. Beijing is attempting to use its monopoly position in the rare earth supply chain as a weapon against the U.S. technology blockade. However, the extreme threat of Trump tariffs has forced China to reassess the cost-effectiveness of this strategy. Delaying the implementation of rare earth controls by a year is both a compromise to U.S. pressure and a way to create more negotiating space for both parties.

Shipping Tariffs and Retaliation Cycle

The discussion also included the high port fees recently imposed by the United States on ships built in China or owned by Chinese companies. In retaliation, China has imposed tariffs on ships built in the United States—of which very few remain operating on international routes—and on ships partially or wholly owned by American companies or investors.

This cycle of retaliation illustrates the complexity of the China-U.S. trade conflict. Every tariff or trade restriction imposed by Trump could trigger a corresponding retaliation from China, which in turn could provoke further countermeasures from the United States. Although shipping tariffs may not be as high-profile as rare earths, their impact on the global supply chain is equally profound. If a framework agreement can resolve this issue, it will bring substantial improvements to the flow of international trade.

The leaders' meeting next week will make the final decision

Trump is expected to meet with Chinese leaders at another economic conference in South Korea on Thursday. Both sides cautiously stated that they have not yet reached a final agreement. “Both sides have formed a preliminary consensus on properly addressing several important economic and trade issues of mutual concern,” said Li Chenggang. He also stated, “The next step will be to carry out their respective domestic approval processes.”

Li Chenggang's mention of the “domestic approval process” can be interpreted as a plan to take administrative measures. The Ministry of Commerce of China issued extensive new export regulations on October 9, postponing the implementation that requires amendments through administrative orders. Like Li Chenggang, Bessent and Greer cautiously described the progress of the Kuala Lumpur negotiations. “We have laid a very successful framework for the discussions between the two national leaders,” Bessent told reporters after the negotiations concluded on Sunday.

The meeting between Trump and Xi will be key to determining whether this Sino-U.S. trade framework agreement can ultimately be implemented. The two leaders need to make commitments at the political level and instruct their respective teams to carry out the details of the agreement. Considering the uncertainty of Trump's tariff policies and the long-term nature of Sino-U.S. strategic competition, even if an agreement is reached this week, future implementation and compliance will still face challenges.