Trump, Xi agree rare-earth supply lifeline and tariff cuts

Dubai: The US and China moved to calm one of the world’s biggest geopolitical and trade flashpoints, with both sides agreeing to scale back tariffs and secure critical supply lines following a high-stakes meeting in South Korea. The agreement halted months of escalating tension and offered global markets a breather, although analysts stressed it remains a tactical pause rather than a lasting reset in relations.

US President Donald Trump and Chinese President Xi Jinping met for roughly 90 minutes in Busan and announced what Trump called an “amazing meeting” that produced a series of steps to ease trade pressure. The US will reduce tariffs linked to China’s fentanyl-related exports from 20% to 10%, while Beijing will resume purchases of American soybeans and energy, including oil and gas from Alaska.

China will also delay tighter export controls on rare earths for at least one year and suspend certain licensing rules. That commitment is central for global supply chains, given China’s dominance in producing materials vital for advanced manufacturing, defence technology and electric vehicles.

“All the rare earths has been settled, and that is for the world,” Trump said, adding that there would be “no roadblock at all on rare earths” for the period covered. Trump also said he plans to visit China in April and that Xi will travel to the United States later next year.

Xi described the outcome as an “important consensus” and urged both sides to complete “follow-up work as soon as possible.” He told Trump that while the two countries do not always agree, they should work as “partners and friends.”

Analysts were quick to caution that the deal does not change the long-term trajectory of the US-China relationship. Sophie Altermatt, Economist at Julius Baer, said the agreement is “a tactical trade truce amid a strategic rivalry that will continue to shape the long-term relationship between the US and China.” She noted that the annual review clause underlines how temporary the arrangement is, describing the deal as a way for both sides to reduce friction while continuing to realign supply chains and geopolitical leverage.

Washington will retain broad export blocks on advanced semiconductor technology, with Trump confirming that the United States will not allow China access to Nvidia’s most advanced Blackwell chips. “We did not discuss approving sales,” he said after markets speculated that a chip concession might be part of the package.

Financial markets welcomed the easing in tensions, though gains were measured. US equity futures were little changed as investors balanced the truce with mixed Big Tech earnings and a Federal Reserve outlook that remains cautious. The dollar held firm, US Treasury yields steadied and the yen weakened further against the greenback after the Bank of Japan kept policy unchanged.

Tech stocks moved unevenly, reflecting investor focus on capital expenditure and artificial intelligence investment returns. Alphabet rallied on cloud growth, Meta fell sharply on spending concerns and Microsoft dipped after failing to meet elevated expectations.

Oil markets saw a brief dip following the summit outcome, as traders weighed the potential for stronger US exports to China against persistent supply headwinds and heavy inventories. Brent drifted toward 64 dollars a barrel while West Texas Intermediate hovered near $60. Crude remains on track for a third month of declines, pressured by expectations of supply growth from OPEC+ and US producers and a projected surplus next year.

The deal avoided contentious political flashpoints, including Taiwan. Trump said the island “never came up.” The leaders did, however, discuss Ukraine, and agreed to remove some shipping tariffs and fees, although details were sparse.

For Beijing, the agreement offers time to stabilise export-driven sectors and manage capital outflows as domestic growth pressures persist. For Washington, the announcement appeals to farm-state voters and demonstrates progress on curbing fentanyl supply chains, a politically sensitive issue. “Our Farmers will be very happy,” Trump said in a social media post.

Markets now look to formal text and the pace of implementation. With both sides signalling they will review the deal annually, investors see room for volatility if either side feels commitments are not being met.

In the short term, the détente removes a layer of uncertainty from global supply chains and commodity markets. The long-term contest for technological and economic leadership, however, remains firmly in place.