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Chinese foreign relations

US and China Reach Preliminary Agreement on Trade Deal Ahead of Trump-Xi Meeting

Strategic Insights

— 2 min read

US trade negotiators announced Sunday that they had preliminarily agreed on several issues, including tariffs and export controls, ahead of an expected meeting between President Trump and Xi Jinping this week. The talks, conducted in Kuala Lumpur, Malaysia, where President Trump is on a nearly weeklong trip to Asia, focused on a wide range of topics, including bilateral trade, export controls, and cooperation on combating fentanyl trafficking. While both sides cautioned that a final deal has not been reached, the negotiations have moved forward with a framework of a deal on tariffs and other issues that the leaders can review and decide if they want to conclude together.

Key Takeaways:

  • The US and China have reached a preliminary agreement on tariffs and export controls, including rare earth metals, ahead of an expected meeting between President Trump and Xi Jinping.
  • The talks in Kuala Lumpur, Malaysia, focused on a range of topics, including bilateral trade, export controls, and cooperation on combating fentanyl trafficking.
  • China's top trade negotiator, Li Chenggang, described the talks as "candid and in-depth discussions" that reached a "preliminary consensus."
  • Treasury Secretary Scott Bessent said he anticipated a "fantastic meeting" between President Trump and Xi Jinping, with a framework agreement on agricultural purchases and fentanyl-related tariffs serving as a "pregame" for the meeting.
  • The discussions also included steep port fees imposed by the US on ships built in China or owned by Chinese companies, as well as Chinese tariffs on American-built ships and ships partly or entirely owned by American companies or investors.
  • China's Ministry of Commerce has severely restricted exports of rare earths and rare earth magnets to countries worldwide since April 4, with further export controls scheduled to take effect on November 8 and December 1.
  • Mr. Trump has threatened to impose 100% tariffs on goods from China if Beijing goes ahead with the export controls, which would limit shipments of products containing Chinese rare earth magnets and equipment to make electric car batteries.
  • Mr. Bessent said he expected China to delay rare earth mineral export controls for a year while re-examining them.

Statistics:

  • 90% of the world's refined rare earths and rare earth magnets are produced in China.
  • Up to 100% of some kinds of rare earths are produced in China for particularly cutting-edge technologies and military applications.
  • 100% tariffs on goods from China were threatened by Mr. Trump if Beijing goes ahead with export controls.
  • Further export controls on rare earths and rare earth magnets are scheduled to take effect on November 8 and December 1.

Sources:

  • Jamieson Greer, US trade representative, quoted in The New York Times, November 3, 2019.
  • Li Chenggang, China's top trade negotiator, quoted in The New York Times, November 3, 2019.
  • Scott Bessent, US Treasury Secretary, quoted in The New York Times, November 3, 2019.
  • Chris Buckley, Alan Rappeport, and Ana Swanson, The New York Times, November 3, 2019.

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