Trump shaves China tariffs in deal With Xi on fentanyl, rare earths

By Trevor Hunnicutt

BUSAN, South Korea (Reuters) -U.S. President Donald Trump said on Thursday he had agreed with President Xi Jinping to trim tariffs on China in exchange for Beijing cracking down on the illicit fentanyl trade, resuming U.S. soybean purchases and keeping rare earths exports flowing.

Trump's face-to-face talks with Xi in the South Korean city of Busan, their first since 2019, marked the finale of a whirlwind Asia trip on which he also touted trade breakthroughs with South Korea, Japan and Southeast Asian nations.

"It was an amazing meeting," Trump told reporters aboard Air Force One shortly after he left South Korea, ranking the talks a "12 out of 10".

Trump said tariffs on Chinese imports would be cut to 47% from 57% by halving the rate of tariffs related to trade in fentanyl precursor drugs to 10%.

Xi will work "very hard to stop the flow" of fentanyl, a deadly synthetic opioid that is the leading cause of American overdose deaths, Trump said.

China agreed to pause export controls announced this month on rare earths, elements that play vital roles in cars, planes and weapons that have become Beijing's most potent source of leverage in its trade war with the United States.

The pause would last for a year, China's commerce ministry said in a statement.

It added that the two sides had also reached consensus on expanding agricultural trade and would work to resolve issues around short video app TikTok, which Trump seeks to bring under U.S.-controlled ownership.

The reaction to the detente in global stock markets was muted, with major Asian indexes and European futures swinging between gains and losses.

China's Shanghai Composite Index slipped from a 10-year high, while U.S. soybean futures were weaker.

"The response from markets has been cautious in contrast to Trump's enthusiastic characterisation of the meeting," said Besa Deda, chief economist at advisory firm William Buck in Sydney.

Among major U.S. trading partners, only Brazil and India are still subject to higher tariffs.

In the run-up to the meeting, world stock markets from Wall Street to Tokyo had hit records on hopes of a breakthrough in a trade war between the world's two largest economies that has disrupted supply chains and rocked global business confidence.

Trump repeatedly talked up prospects of reaching agreement with Xi since U.S. negotiators on Sunday said they had agreed a framework with China to avoid 100% U.S. tariffs on its goods and defer China's export curbs on rare earths.