Global investor sentiment has eased slightly after the United States and China peacefully reached a new trade understanding in Busan, South Korea, offering temporary relief from months of escalating tariff tensions that have unsettled markets.
For weeks, investors had been closely monitoring developments between the world’s two largest economies, with some shifting toward safe-haven assets such as gold amid fears of prolonged trade disruptions. The tariff standoff had rattled global supply chains, weakened commodity demand and clouded growth outlooks across Asia and beyond.
However, that mood softened after U.S. President Donald Trump and Chinese President Xi Jinping struck an agreement to reduce tariffs and suspend new restrictions on rare earth exports, key materials used in cars, aircraft and advanced weapon systems.
According to Reuters, tariffs on Chinese imports will be cut to 47% from 57%, with Washington halving rates related to trade in fentanyl precursor drugs. In return, Beijing pledged to intensify efforts to curb illicit fentanyl flows, resume U.S. soybean purchases, and pause recently announced export controls on rare earths for one year.
The rare earth decision is particularly significant, easing fears that China, which dominates global supply, could weaponize access to the minerals as leverage in its trade war with Washington.
China’s commerce ministry said the pause on export controls would last through 2026, while both sides also agreed to expand agricultural trade and revisit unresolved issues surrounding the short-video platform TikTok.
Despite the breakthrough, global market reaction has been muted. Major Asian indexes fluctuated between gains and losses on Thursday, while U.S. soybean futures dipped slightly. Analysts say that while the Busan deal signals progress, underlying tensions, including technology restrictions and strategic competition, remain unresolved.
“The response from markets has been cautious,” said Sydney-based economist Besa Deda in a Reuters interview, noting that investors remain uncertain about how long the truce will hold.
Trump described the meeting as “amazing,” saying he would travel to China next April for further talks before hosting Xi in Washington later in 2025.
For now, the détente offers global investors a brief respite and hope that a prolonged trade war might be avoided, though few expect the rivalry between Washington and Beijing to end anytime soon.
