Chinese and United States negotiators have set the stage for a successful meeting in South Korea on Thursday between Xi Jinping and Donald Trump. But the agreement on a framework for more talks and a pause on any further escalation of trade hostilities, leaves the biggest issues unresolved.
US treasury secretary Scott Bessent described his talks to Chinese vice-premier, He Lifeng, in the Malaysian capital of Kuala Lumpur as constructive and far reaching. The Chinese side spoke of “candid, in-depth and constructive exchanges” on key economic and trade issues of mutual concern.
“The US side took a firm stance, while the Chinese side was resolute in safeguarding its interests. After more than a day of intensive discussions, both sides explored constructive ways to properly address their respective concerns and reached a preliminary consensus,” Mr He told Chinese media.
Mr Bessent said that Mr Trump’s threat to impose an extra 100 per cent tariff on Chinese goods was now off the table and the suspension of steep “reciprocal” tariffs will be extended. He suggested that China could postpone its threat to impose export controls on products containing even tiny amounts of rare earth minerals.
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They also discussed port fees the US has slapped on Chinese ships and the more far-reaching fees China imposed in retaliation on vessels whose owners included American investors. And China appears to have agreed to resume purchases of soybeans from American farmers, an important part of Mr Trump’s base in the Midwest.
Both sides reported progress on the issue of fentanyl and the 20 per cent tariff the US imposed on China for allegedly not doing enough to stop the export of chemicals used to manufacture the drug. Beijing appears to have agreed to step up enforcement measures but it is not clear if Washington will remove the 20 per cent tariff immediately.
Mr Bessent said there would be no change to US export controls, which include restrictions on the sale of advanced microchips to China. And neither side indicated whether Washington will reverse the sweeping expansion announced last month of its list of Chinese companies on an entity list that leaves them subject to sanctions.
Mr Trump and Mr Xi will be able to signal a thaw in their relationship on Thursday and the US president is expected to visit China early next year. A truce in the trade war could give both sides time to become less reliant on one another but the intensity of their rivalry is unlikely to diminish.
While he was in Kuala Lumpur, Mr Trump signed trade agreements with Malaysia, Cambodia, Thailand and Vietnam but all four countries remain subject to steep tariffs. After he left, the Chinese took centre stage in the Asean group of southeast Asian states as a champion of free trade in the region.
Malaysia also hosted the first summit for five years of the Regional Comprehensive Economic Partnership, which includes the 10 Asean countries, along with China, Australia, Japan, New Zealand and South Korea. Its member-states account for about 30 per cent of the world’s gross domestic product (GDP) making it the biggest trading bloc in the world and a substantial hedge against Mr Trump’s tariffs.
