Chinese and US trade negotiators have lined up a series of diplomatic victories that Donald Trump and Xi Jinping will unveil at a summit this week. These easy hits are attractive to investors, but leave deeper core conflicts unresolved.
President Donald Trump told reporters on Monday that “I feel really good” about a deal with China, after officials unveiled a slew of agreements in Malaysia over the weekend to ease trade tensions. That will likely see China resume soy purchases in key Republican voting states, while America rolls back its latest 100% tariff threat in exchange for securing Beijing’s crucial rare earth magnets.
Markets rose on the news, with the MSCI index of global shares testing all-time highs, but analysts warned that the deal Trump and Xi would sign left South Korea ignoring thorny issues. Fundamental fights over national security seemed untouched, they said, along with Trump’s stated core mission of rebalancing trade. What makes that even more difficult is that Chinese investment in America is still severely limited.
“Picking the low-hanging fruit inherently makes the road ahead more difficult because it leaves the tough, high-stakes conflicts for last,” said Sun Chenghao, a fellow at Tsinghua University in Beijing. “The grand deal requires addressing deep disagreements over state subsidies, technology competition and national security – areas where both parties’ fundamental models clash.”
That means a series of smaller, sectoral agreements reached through sustained dialogue are more likely in the coming years, he added.
US Treasury Secretary Scott Bessent has urged China to rebalance its economy and increase domestic consumer spending during recent trade negotiations. Beijing appeared to ignore these calls last week, unveiling a policy document emphasizing self-sufficiency in manufacturing and technology as the driving forces behind China’s economy until at least 2030.
The contours of the China deal emerged as Trump began his week-long trip to Asia by signing trade deals with Thailand and Malaysia on rare earths, and promising to fight anti-dumping with Cambodia – all points of contention with China. The Republican gathering of US allies in Beijing’s backyard appeared designed to gain leverage ahead of his first meeting with Xi since returning to power.
Secretary of State Marco Rubio said during a phone call with Chinese Foreign Minister Wang Yi on Monday that the leaders’ meeting would take place in the South Korean city of Busan, a Foreign Ministry spokesman said.
Underscoring the importance of dialogue between leaders, Trump reiterated his pledge to visit China and suggested Xi could come to Washington or Mar-a-Lago, his private club in Florida. China will host the Asia-Pacific Economic Cooperation forum in 2026, while the US will host the Group of Twenty leaders’ summit, giving both a reason to visit each other’s countries.
Explanation: How the trade war between the US and China has flared up again
Since Trump made China the main target of America’s toughest tariff regime since the 1930s, bilateral ties have oscillated between escalation of escalation and economic talks to bring the temperature down.
The Chinese Communist Party’s official mouthpiece on Monday urged the world’s largest economies to avoid falling back into that cycle, calling for efforts to “jointly secure the hard-won results” from their latest talks.
That commentary from the People’s Daily called on the US to stick to the consultation mechanism led by Bessent and Chinese Vice Premier He Lifeng. Export restrictions announced by U.S. officials outside that framework have destabilized relations several times, prompting Beijing to block its supply of rare earths critical to U.S. manufacturing.
“Both sides now appear to be primarily focused on stability,” Daniel Kritenbrink, a partner at The Asia Group and former U.S. assistant secretary of state for East Asian and Pacific Affairs, told Bloomberg Television. “But none of the foundations of this relationship have changed.”
Although Bessent said he believed China would delay its latest restrictions on rare earths after the latest talks “for a year while they reexamine them,” friction over export controls remains. Chinese officials have used their stranglehold over the magnets needed to make everything from cellphones to missiles to push back against U.S. restrictions on advanced chips. Washington says these measures are necessary to curb China’s military ambitions.
However, it was unclear how Beijing would logistically enforce restrictions that would control any global shipment containing even a trace of certain rare metals from China, a move that also sparked outrage in Europe.
China has unveiled its latest measures in retaliation against the US, expanding its own sanctions list to include thousands more Chinese companies. Now that Bessent says rolling back U.S. export controls is off the table, a key question is what Xi gets in return for the pause, aside from reducing the threat of higher tariffs — and how long the delay will remain in place.
“China will never give up its influence on rare earths,” said Dexter Roberts, a non-resident senior fellow at the Atlantic Council’s Global China Hub. “That would be sheer stupidity on their part.”
One area where US officials signaled progress was fentanyl, raising the prospect that a 20% tariff Trump imposed to pressure Beijing to stem the flow of chemicals used to make the deadly drug could be reduced. A relief from that levy – which comes on top of Liberation Day tariffs – could be a boon for the Asian country at a time when domestic demand is weak.
The elimination of fentanyl tariffs on China could limit U.S. export losses to less than 10%, according to Maeva Cousin of Bloomberg Economics.
Other major issues, such as an investigation into China’s implementation of the “Phase One” deal from the first trade war, appear unresolved, although Trump suggested Monday he could drop that investigation if things go well.
Ultimately, the deal came down to a mix of minor issues, said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies in Washington, noting that Beijing’s industrial policy was apparently not in question.
“They have pushed the can down the road and focused on very concrete, narrow issues, brushing aside broader questions about China’s economic system and economic security,” he added. “It is very unlikely that they will ever address these broader issues directly.”
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Published on October 28, 2025
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