U.S. and Chinese Leaders Convene in Kuala Lumpur to Defuse Trade Tensions
Economic leaders from the United States and China will gather in Kuala Lumpur on Friday to engage in critical discussions aimed at averting an escalation in their ongoing trade dispute and ensuring the scheduled meeting between U.S. President Donald Trump and Chinese President Xi Jinping next week remains on course. U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer will meet with Chinese Vice Premier He Lifeng to address tensions sparked by Trump’s threat of imposing 100% tariffs on Chinese goods and other trade restrictions starting November 1. This threat was a response to China’s expanded export controls on rare earth magnets and minerals, which have significant implications for global supply chains. The talks, set to commence on Saturday during the Association of Southeast Asian Nations Summit in Malaysia’s capital, mark the fifth round of negotiations between these officials since May, shifting the venue from European cities to a pivotal Asian trade hub reliant on both U.S. and Chinese markets.
China’s Dominance in Rare Earth Minerals Sparks Global Concerns
The discussions will center on China’s commanding grip over the global supply of rare earth minerals and magnets, critical components for high-tech industries, which Beijing has leveraged as a strategic tool against the U.S. Earlier this year, in April, Trump introduced new tariffs on Chinese imports, which rapidly escalated to triple-digit levels on both sides. In retaliation, China halted rare earth supplies to U.S. buyers, threatening to disrupt American production of electric vehicles, semiconductors, and defense systems. The initial meeting between Bessent, Greer, and He in Geneva in May resulted in a 90-day truce, reducing U.S. tariffs to approximately 55% and Chinese tariffs to 10%, while resuming magnet exports. Subsequent meetings in London, Stockholm, and Madrid refined these terms, culminating in an agreement to transfer control of the Chinese short-video platform TikTok to U.S. ownership.
However, the fragile truce unraveled when the U.S. Commerce Department expanded its export blacklist on October 10, automatically including firms with over 50% ownership by already-listed companies, effectively barring U.S. exports to thousands of additional Chinese entities. In response, China implemented global export controls on rare earths, requiring licenses for products utilizing Chinese rare earths or related technologies, aiming to restrict their use in military applications worldwide.
U.S. Pushes Back Against China’s Supply Chain Strategy
Bessent and Greer condemned China’s export controls as an attempt to dominate global supply chains, pledging that the U.S. and its allies would resist these measures. Sources familiar with the matter, as reported by Reuters, indicate that the Trump administration is contemplating further restrictions on a wide range of software-driven exports to China, including laptops and jet engines. The Kuala Lumpur talks are critical for both sides to restore the previous trade equilibrium, ensuring the continued flow of rare earth magnets and averting a significant U.S. tariff increase. Failure to reach an agreement could jeopardize the upcoming Trump-Xi summit at the Asia Pacific Economic Cooperation Summit in South Korea.
Negotiations Aim to Balance Trade and Political Priorities
Analysts remain cautiously hopeful about the outcome of the Kuala Lumpur discussions. Dennis Wilder, a senior fellow at Georgetown University’s Initiative for U.S.-China Dialogue on Global Issues, expressed optimism, stating, “I believe this meeting will yield tactical decisions to extend the current pause.” He suggested that Trump is unlikely to implement the full 100% tariffs, and China may soften its stance on restricting rare earth exports to global defense sectors. Additionally, the U.S. is expected to urge China to resume purchasing American soybeans, as the absence of such purchases in September has economically strained U.S. farmers, a key political base for Trump. However, Philip Luck, director of the Center for Strategic and International Studies’ Economics Program, noted that addressing deeper U.S. concerns about China’s export-driven economic model—such as rebalancing toward consumption and reducing overcapacity—may take a backseat to immediate priorities like soybean purchases. “We’re focused on immediate issues like soybeans, which overshadows the core economic imbalances,” Luck explained during an online forum.
