10 months ago
US and China Near Trade Deal Over Fentanyl, Tariffs, and Rare Earths
Imagine two big countries, the U.S. and China, who have been arguing about trading things, like a big disagreement.
They are going to talk about making up.
One part of the talk is about a medicine called fentanyl that has caused a lot of problems.
The U.S. says if China stops letting the ingredients for this medicine be sent out, they might lower some of the extra charges (tariffs) they put on Chinese products.
China is expected to agree to help with the fentanyl issue and also buy more American soybeans, which are like a special food for animals.
In return, the U.S. might not put even higher charges on some Chinese goods and is expecting China to wait a year before making new rules about important materials called rare earths.
If they agree, it could make things calmer between them.
The U.S. and China are nearing a trade agreement framework centered on fentanyl precursor chemical controls and tariff adjustments.
China is expected to commit to stricter export controls on chemicals used to make fentanyl.
The U.S. may reduce its 20% tariff on Chinese goods by up to 10% in exchange for fentanyl cooperation.
China is also anticipated to agree to purchase American soybeans and delay new rare-earth export controls.
FBI Director Kash Patel is expected to travel to Beijing to discuss fentanyl issues with Chinese authorities.
- Who
- U.S. and China
- What
- Approaching a trade agreement framework that includes potential tariff reductions in exchange for China cracking down on fentanyl precursor chemicals, commitments on soybean purchases, and delays in rare-earth export controls.
- Where
- Discussions involve high-level negotiators, with a meeting between President Trump and Chinese leader Xi Jinping, and a potential trip by FBI Director Kash Patel to Beijing.
- When
- The framework is set to be discussed on Thursday, with potential details hammered out in subsequent negotiations.
- Why
- To ease market-rattling tensions between the world's two largest economies, address the opioid crisis, and potentially alleviate economic impacts on U.S. farmers.
U.S. Stance
China's Stance
Fentanyl Tariffs
U.S. Stance
The U.S. proposes rolling back some of its 20% tariff on Chinese goods if China cracks down on fentanyl precursor chemical exports. This could lower the average tariff on Chinese imports.
China's Stance
China is expected to commit to more controls on fentanyl precursor chemicals. Chinese negotiators insist they will not lift retaliatory duties on U.S. soybeans until the U.S. removes the fentanyl tariffs.
Rare Earths
U.S. Stance
The U.S. expects China to delay new rare-earth controls for a year, effectively removing the threat of a 100% tariff from the U.S.
China's Stance
It is unclear how a different set of rare-earth restrictions announced in April will be affected, with authorities potentially able to ramp them up again.
Trade Framework
U.S. Stance
The U.S. sees the framework as 'very successful' and expects China to commit to significant purchases of American soybeans.
China's Stance
China's Vice Commerce Minister states there is 'preliminary consensus' and both sides will undergo domestic approval processes, with a desire to avoid further 'turbulences and twists and turns'.
Key facts
- Meeting Date
- Thursday
- Fentanyl Tariff Reduction
- Potential reduction of U.S. 20% tariff by up to 10%
- Current Average Tariff on Chinese Goods
- ~55%
- Proposed Average Tariff on Chinese Goods
- ~45%
- Rare Earths Tariff Threat
- 100% tariff threatened by U.S. by Nov. 1, now effectively off the table
- Key U.S. Negotiator
- Treasury Secretary Scott Bessent
- Key Chinese Negotiator
- Vice Commerce Minister Li Chenggang
Timeline
Trade war pressures slashed soybean prices.
China halted US soybean buys.
Beijing shifted to Brazilian beans.
US farmers faced unsold stockpiles.
Deal nears: Fentanyl for soybeans?
Quotes
Scott Bessent
U.S. team leader and Treasury Secretary
“I believe that they are going to delay that for a year while they re-examine it”
livemint.com
“effectively off the table”
livemint.com
Chris Weston
head of research at Pepperstone Group Ltd.
“Gold continues to print lower lows, but the bulls will take comfort from the defence of $3,900 in the front-month futures.”
CNBC TV 18
“There are now clearer signs that buyers are stepping in and that the recent positioning unwind may have run its course.”
CNBC TV 18
Li Chenggang
Chinese Vice Commerce Minister and senior member of China’s trade delegation
“The current turbulences and twists and turns are the ones that we do not wish to see”
livemint.com
“preliminary consensus”
livemint.com
Sources
Gold steady after three-day drop as trade hopes sap haven demand
From Trump To Trade: 5 Takeaways From This Year's ASEAN Summit
Trump, Xi to discuss lowering China tariffs for fentanyl crackdown
China, ASEAN Sign Upgraded Free Trade Pact Amid Global Trade Tensions
China Signs Expanded ASEAN Free Trade Pact, Pitches Itself As Alternative To US Protectionist Policies
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