US and China tee up sweeping trade deal ahead of Trump–Xi meeting
Top Chinese and US economic officials on Sunday have agreed on the framework of a potential trade deal that will be discussed when US President Donald Trump and Chinese President Xi Jinping meet later this week, CNBC reported on Sunday.
US Treasury Secretary Scott Bessent said that discussion on the sidelines of the ASEAN Summit in Kuala Lumpur had eliminated the threat of Trump’s 100% tariffs on Chinese imports starting November 1. Bessent added that he expects China to delay implementation of its rare earth minerals and magnets licensing regime by a year while the policy is reconsidered.
Market reaction
At the time of writing, the AUD/USD is trading 0.37% higher on the day to trade at 0.6537.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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