Trump and Xi Agree to Trade Deal, Lowering Tariffs and Resuming Soybean Purchases

Strategic Insights -

US President Donald Trump and Chinese President Xi Jinping met on the sidelines of the Asia-Pacific Economic Cooperation Summit in South Korea, where they agreed to a trade deal that lowers tariffs and resumes soybean purchases. The deal, announced Thursday, marks a significant step towards resolving the highly contentious trade war between the two countries. According to Trump, China will now be subject to a 47% tariff rate, down 10 percentage points from the average rate before the meeting. In exchange, Xi agreed to resume purchasing soybeans and to delay restrictions on rare earth minerals for a year.

Key Takeaways:

  • The trade deal includes the reduction of tariffs on Chinese imports from 57% to 47%.
  • China has agreed to resume purchasing soybeans, with Treasury Secretary Scott Bessent stating that China will buy 12 million metric tons of soybeans this season, and at least 25 million metric tons each year over the next three years.
  • Trump has reduced the tariffs tied to fentanyl to 10% from 20%, and the leaders agreed to work together to stop the flow of the drug.
  • The deal will have to be renewed annually, with Trump stating that the leadership of the US and China will renegotiate the deal every year.
  • Chinese officials have pushed hard for a loosening in Washington's technology controls, which have hamstrung China's AI and defense sectors.
  • Trump and Xi did not discuss Blackwell chips, the company's new advanced semiconductors, according to Jamieson Greer, the US trade representative.
  • The meeting appeared to have focused largely on trade-related topics, with Trump stating that the US and China will work together on issues like infectious diseases, artificial intelligence, and illegal immigration.

Statistics:

  • The current tariff rate on Chinese imports is 47%, down 10 points from the average rate before the meeting.
  • US importers pay around 47% of the costs of tariffs on Chinese imports, which are often passed on to consumers.
  • China has agreed to buy 12 million metric tons of soybeans this season.
  • US agricultural experts predict that Chinese purchases of soybeans will remain lower than pre-trade war levels due to Beijing's diversification of its soybean supply.

Sources:

  • "Trump and Xi Agree to Trade Deal, Lowering Tariffs and Resuming Soybean Purchases" by Cat Zakrzewski, Katrina Northrop, Natalie Allison (The Washington Post)
  • "US, China Agree to Trade Deal Amid Tariff Dispute" (AP News)
  • "US-Chinese Trade Deal Marked by Progress on Some Issues, But Significant Differences Remain" (Bloomberg)
  • "Trump and Xi Agree to Trade Deal, Lowering Tariffs and Resuming Soybean Purchases" by Ian Bremmer (Eurasia Group)