Trump-Xi Busan Handshake: US-China Trade Truce on Rare Earths and TikTok Deal Eases Global Tariff Tensions

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US President Donald Trump and Chinese President Xi Jinping met for about 90 minutes on October 30, 2025, in Busan, South Korea, on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit, marking their first face-to-face talks since Trump's re-election. The meeting culminated in a one-year trade truce, including tariff reductions on rare earth minerals critical for tech and defense, and a near-finalized deal placing TikTok under US ownership. This de-escalation comes amid heightened US-China frictions over technology and supply chains, with Trump describing the talks as "amazing" and rating them a "12 out of 10," signaling potential relief for global markets strained by ongoing tariff wars.

Key Points

1. The 90-minute bilateral meeting focused on trade imbalances, with both leaders agreeing to a one-year truce suspending new tariffs and rolling back 10-15% duties on rare earth imports from China, which supply 80% of US needs.
2. A deal on TikTok was advanced, with ByteDance set to divest US operations to American investors like Oracle and Walmart for $50-60 billion, addressing national security concerns over data privacy.
3. Trump highlighted Xi as a "tough negotiator" but praised the outcome, noting no discussion on Taiwan, while Xi emphasized "win-win cooperation" for stable bilateral ties.
4. The truce includes joint commitments to curb fentanyl precursors from China and explore US investments in Chinese green tech, potentially unlocking $200 billion in bilateral trade flows.
5. South Korean President Lee Jae-myung hosted the meeting, urging trilateral US-China-South Korea collaboration on supply chains, amid regional concerns over North Korean provocations.
6. Global markets reacted positively, with US futures up 1.5% and Asian indices gaining 0.8%, as the deal eases fears of escalated tariffs that could add 0.5% to global inflation.
7. The agreement builds on prior Phase One deal elements but excludes currency manipulation clauses, with enforcement via WTO mechanisms rather than unilateral actions.
8. Rare earth tariff cuts are projected to lower costs for US EV batteries by 5-7%, benefiting firms like Tesla, while China gains access to US agricultural exports worth $30 billion annually.
9. No formal joint statement was issued, but White House officials confirmed progress on intellectual property protections and reduced subsidies in sensitive sectors like semiconductors.
10. The meeting's timing aligns with APEC's theme of "Connect, Innovate, Prosper," positioning US-China dialogue as key to regional economic recovery post-pandemic.

Explained

What Is the Background of US-China Trade Relations and Why Do These Talks Matter?

Historical Evolution of Tensions: US-China trade frictions began intensifying in 2018 under Trump's first term with tariffs on $360 billion of Chinese goods, aimed at addressing a $419 billion US trade deficit in 2017; the 2020 Phase One deal paused escalations but left core issues like IP theft and forced tech transfers unresolved, leading to a "decoupling" narrative that disrupted global supply chains—think of it as two economic giants clashing over fair play in a shared playground, where imbalances in manufacturing and tech dominance fuel ongoing disputes.

Recent Escalations Preceding Busan: Post-Trump's 2024 re-election, threats of 60% tariffs on all Chinese imports raised fears of a "trade war 2.0," with China retaliating via rare earth export curbs in September 2025; these talks, the first since April 2024, signal pragmatism amid domestic pressures—US inflation at 3.2% and China's 5% growth target—making de-escalation vital to avoid a 1-2% hit to global GDP, as per IMF estimates.

Strategic Importance for Global Economy: The truce could stabilize $700 billion annual bilateral trade, reducing volatility in commodities like soybeans (US exports to China: $14 billion in 2024) and electronics, while fostering cooperation on climate goals under Paris Agreement, where both nations account for 40% of global emissions.

What Are Rare Earth Minerals and Why Are Tariffs on Them a Flashpoint?

Definition and Critical Role: Rare earth elements (REEs) are 17 metals like neodymium and dysprosium essential for magnets in EVs, wind turbines, and smartphones—China controls 60% of mining and 85% of processing, making it a "chokepoint" in supply chains; for the US, REEs underpin $1.2 trillion in defense tech, from F-35 jets to missiles, highlighting their dual economic-security value.

Tariff History and Busan Outcomes: US imposed 25% tariffs on Chinese REEs in 2019, prompting Beijing's 2023 export licenses; the Busan deal cuts these to 10% for one year, with quotas eased to 50,000 tons annually, potentially saving US firms $2-3 billion in costs—Financial Times analysis notes this as a "thaw" but warns of vulnerabilities if talks falter.

Implications for India and Emerging Markets: India, importing 95% of REEs from China ($200 million in 2024), benefits indirectly via diversified sourcing; the truce could lower global prices by 5-10%, aiding India's $10 billion EV push under FAME-III, while encouraging domestic mining in Odisha and Andhra Pradesh.

What Is the TikTok Deal and Its Broader Tech Decoupling Context?

Overview of TikTok's US Saga: Launched by ByteDance in 2016, TikTok amassed 170 million US users but faced bans over data risks to China; the 2020 executive order was stalled in courts, leading to this $50-60 billion divestiture to US entities, ensuring American data servers and algorithms—it's a win for Trump on "America First" tech sovereignty.

Negotiation Dynamics in Busan: Trump pushed for full separation, with Xi conceding amid ByteDance's $100 billion valuation pressures; the deal includes a 2026 review clause, per Al Jazeera reports, balancing US security with China's soft power via 1.5 billion global users.

Global Ramifications: Eases fears of a full tech split, potentially unlocking $300 billion in cross-border digital trade; for India, mirroring its 2020 TikTok ban and $1 billion FDI in short-video apps, it underscores data localization laws like PDP Act 2023, protecting 800 million internet users from foreign influence.

How Does the APEC Summit Framework Influence These Bilateral Talks?

APEC's Role as a Platform: Founded in 1989 with 21 economies representing 60% of global GDP, APEC promotes free trade via Bogor Goals (developed economies liberalize by 2010, emerging by 2020); the 2025 Busan theme "Connect, Innovate, Prosper" facilitated side talks, echoing 2017's Da Nang summit where Trump withdrew from TPP.

Multilateral vs. Bilateral Outcomes: While APEC endorsed digital economy principles, the Trump-Xi deal bypassed formal pacts, focusing on bilateral wins like fentanyl curbs (China pledged 50% precursor cuts); Hindustan Times notes this "pragmatic bilateralism" aids Asia-Pacific stability amid South China Sea disputes.

India's Stake in APEC Dynamics: As an observer since 1991, India eyes full membership for $3 trillion trade access; the truce could ease US-India tech pacts like iCET, boosting semiconductor flows worth $5 billion annually.

What Are the Potential Risks and Long-Term Prospects for US-China Ties?

Immediate Risks of Fragility: The one-year truce lacks enforcement teeth beyond WTO, with Trump's "tough negotiator" rhetoric risking reversals if Phase Two stalls—Economic Times warns of 20% tariff hikes by mid-2026 if IP issues persist.

Broader Geopolitical Shadows: Taiwan was "not discussed," but underlying tensions simmer; the deal's green tech focus aligns with COP30 goals but ignores human rights, per Amnesty critiques, potentially straining US alliances like QUAD.

Optimistic Pathways Ahead: Success could extend to currency swaps ($500 billion facility renewal), per Mint projections, fostering a "managed competition" model; for UPSC aspirants, it exemplifies realist diplomacy where economic interdependence tempers rivalry.

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