Xi-Trump deal – ceasefire but not peace treaty

Mark O'Neill October 31, 2025 11:16

The agreement signed by Presidents Xi Jinping and Donald Trump on Thursday marked a truce in the economic war between the two nations but not a treaty.

Each side got something they wanted – Beijing agreed to suspend for one year sweeping controls on exports of rare metals and Washington also to suspend for a year plans to extend technology-related export controls to subsidiaries of Chinese companies.

Trump also agreed to suspend recently imposed port fees on China’s maritime, logistics and shipbuilding industries for one year and Beijing to suspend counter-measures against U.S.-linked ships.

Beijing agreed to buy 25 million metric tonnes of American soybeans over three years. This equals the amount China bought in the 2023-24 marketing year, which amounted to 54 per cent of all U.S. soybean exports. China ceased buying U.S. soybeans in May this year, to protest the high level of Trump’s tariffs.

Trump has cut the overall tariff rate on Chinese imports from 57 per cent to the current 45 per cent.

Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington, said that Beijing had gained the upper hand in negotiations. “Xi stared down Trump and Trump blinked. He has mastered managing Trump. Meeting U.S. threats with larger threats has gotten Washington to back down.”

Xi’s trump card was the imposition of rare earth controls. The International Energy Agency estimates that China accounts for about 61 per cent of rare earth production and 92 per cent of their processing. The industries of the developed world depend on them, for use in cars, computers, weapons, civil and military aircraft and many other products.

In April, the Ministry of Commerce halted exports from China of seven kinds of rare earth metals and rare earth magnets made from them, except with licences it had issued.

On October 9, it went further, halting any further export of technology or equipment that might help other countries develop their own rare earth mines, refineries and magnet factories, except with its permission.

The October orders were, in the words of U.S. Treasury Secretary Scott Bessent, “a bazooka at the supply chains and the industrial base of the entire free world.”

European and American business leaders and officials said the ministry was approving only half their requests for export licenses for rare earth magnets. Many factories are barely receiving enough shipments from China to stay open, and some have had brief closures. The export controls are “putting the stability of global supply chains at stake,” the European Union Chamber of Commerce in China said in September. Factories that need the magnets to make products like brakes and car seats have been unable to replace their usual inventories.

The metals are not in fact rare. There are deposits all over the world. In mid-September, Turkey announced a new mine of 12.5 million tonnes of rare earths in the northwest of the country. It asked for foreign investors to help develop it. China, on the other hand, has gradually built up its mining and processing over many years.

But the metals are costly to mine and very damaging to the environment to process. So rich countries have declined to mine and process them and come to depend on imports, mainly from China. It will take years to bring alternative reserves to industrial use.

Not since China joined the World Trade Organisation in 2001 has any country had such a powerful trade weapon to face off the U.S. Since Trump launched his tariff war against trading partners at the start of the year, no other country has won such concessions.

Thursday’s deal is only a pause in a long war between China and the U.S. Since 1945, only the Soviet Union has challenged the U.S. as the world’s dominant power, and only in the military and political spheres.

In the 1980s, Japan was an economic challenger but did not wish to replace the U.S.
For the first time, U.S. faces a country challenging it in all sectors – economy, military, space and diplomacy. It accounts for 35 per cent of global manufacturing, more than the next nine countries combined.

Despite the high tariffs imposed by Trump at the start of the year, China posted an overall trade surplus of US$785.3 billion in the first eight months of 2025. For the full year, it is expected to achieve a record trade surplus of US$1.2 trillion, up from the previous record of US$992 billion set in 2024.

While its exports to the U.S. have fallen by 20 per cent this year, it has found other markets to replace it.

“Standing up to Trump can pay off,” said the Financial Times in its editorial on the trade deal. “It will reinforce Beijing’s own view that it must keep working to bolster its strategic leverage with the U.S.”

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.