Trump and Xi Reach Trade Deal, Lowering Tariffs and Easing Global Tensions

U.S. President Donald Trump and Chinese President Xi Jinping reached a major trade understanding on Thursday during their first in-person meeting since 2019 in Busan, South Korea. The agreement involves lowering tariffs and strengthening cooperation on key economic and security issues.

Key Terms of the Trade Agreement:

• U.S. Tariff Reduction: President Trump announced a reduction in tariffs on Chinese imports, cutting the overall rate from 57% to 47%. Significantly, tariffs on fentanyl precursor chemicals were sharply cut from 20% to 10%.
• China's Commitments:In exchange, Beijing agreed to:
  • Stricter enforcement against illicit fentanyl exports.
  • Resumption of large-scale U.S. soybean purchases.
  • Guaranteed continued exports of rare earth materials, which are critical for high-tech industries.
• Tariff Relief: The agreement postpones the U.S. plan for 100% tariffs on Chinese goods and delays China’s proposed export restrictions on rare earth elements.

Trump praised the meeting as "12 out of 10," calling it a turning point in U.S.-China relations.

Market Reaction and Macroeconomic Context

Global markets reacted cautiously, with Asian indexes fluctuating and the Shanghai Composite falling from its high. Analysts attributed the muted reaction to the fact that the deal was largely anticipated, noting that investors had hoped for a full removal of fentanyl-related tariffs.

The diplomatic breakthrough closely followed the Federal Reserve's decision just one day prior to end its quantitative tightening (QT) cycle and deliver an expected rate cut.

• Macro Tailwind: The combination of easing trade tensions and the Fed's dovish monetary policy is expected to inject fresh liquidity into global markets—conditions that historically favor risk assets.
• Inflation & Risk-On: Lower tariffs could help ease inflationary pressures, giving central banks more room for looser monetary policy. This environment, often leading to a weaker dollar and a "risk-on" sentiment, is seen as a major tailwind for speculative assets like Bitcoin and Ethereum.

Geopolitical Nuance

Despite the successful dialogue, experts caution that both nations remain rivals. Xi emphasized that cooperation must continue despite underlying competition. The leaders notably avoided direct discussion on chip exports, and Washington continues to pursue alternative rare earth alliances with other nations.

Investors are now watching to see if this trade detente proves more durable than previous ceasefires, which would further stabilize global supply chains and potentially boost market confidence heading into 2026.

October 2025, Cryptoniteuae