Global stock markets surged to unprecedented levels following the US China trade agreement reached Thursday in Busan, South Korea, with major American indices closing at all time highs as investors embraced reduced geopolitical risk despite lingering questions about the deal’s durability.
The S&P 500 climbed to 6,861.62 on Monday, October 27, after anticipation of the deal drove a 1.2 percent single day gain, while the Dow Jones Industrial Average reached 47,457.50 and the tech heavy Nasdaq Composite hit 23,551.70. The rally reflected investor relief that months of escalating trade tensions between the world’s two largest economies might ease through the framework agreement announced after President Donald Trump met Chinese President Xi Jinping.
Under terms disclosed Thursday, the United States will reduce tariffs on Chinese imports to 47 percent from 57 percent, cutting levies related to fentanyl precursor drugs by half. China agreed to suspend export controls on rare earth elements for one year, resume purchases of American soybeans, and intensify efforts curbing illicit fentanyl flows into the United States.
Trump described the 90 minute bilateral meeting at Gimhae Air Base as “amazing,” rating it “12 out of 10” and declaring the rare earth issue “settled” while expressing confidence that agreements with Xi would prove durable. The American president announced plans to travel to China next April for further talks before hosting Xi in Washington later in 2025.
The agreement suspends for one year the United States’ 50 percent ownership rule targeting Chinese company subsidiaries, while Beijing makes “corresponding adjustments” to trade countermeasures announced October 9. Both nations also agreed to pause port fees imposed on each other’s vessels, providing relief to shipping, logistics, and shipbuilding industries caught in the escalating trade conflict.
China’s rare earth export control suspension proves particularly significant given Beijing’s dominance of global supply. China controls nearly 70 percent of rare earth mining and processes almost 90 percent of world output, giving the nation powerful leverage over critical minerals essential for manufacturing electric vehicles, wind turbines, smartphones, advanced weapon systems, and renewable energy technologies where few substitutes exist at commercial scale.
Beijing’s October 9 announcement had drastically tightened export restrictions, imposing complex new rules extending controls beyond China’s borders to include companies worldwide using Chinese origin materials. The sweeping extraterritrial scope rattled global markets and widened the trade conflict to include nations beyond the United States, potentially miscalculating by targeting the entire world simultaneously rather than focusing pressure specifically on Washington.
Shares of US listed rare earth mining companies rallied Thursday following confirmation of the suspension. Critical Metals jumped nearly seven percent in premarket trading, USA Rare Earth rose around six percent, and Energy Fuels climbed three percent. MP Materials and NioCorp Developments both gained approximately three percent as investors anticipated reduced pressure on alternative supply chains being developed outside China.
The market response reversed earlier trends toward safe haven assets that had dominated investor positioning during months of escalating tensions. Gold prices, which had surged above $4,300 per troy ounce during peak uncertainty, fell below $4,000 as trade optimism reduced demand for traditional hedges against geopolitical instability. The shift illustrated how quickly sentiment can pivot when major risk factors ease, even temporarily.
Yet agricultural markets showed more skepticism about the agreement’s substance. Soybean futures declined 1.9 percent to $10.74 per bushel following the official announcement, disappointing farmers and traders who had hoped for robust rally based on Trump’s claims China would purchase “tremendous amounts” of American farm products starting immediately.
The muted soybean response reflected absence of specific purchasing commitments. While Trump emphasized agricultural trade expansion, evidence showed modest volumes compared to historical norms. Ahead of the summit, China owned COFCO bought three US soybean cargoes for December and January shipment, totaling approximately 180,000 metric tons. By comparison, China purchased nearly six million tons of US soybeans in October 2024 alone and 27 million tons for the full year.
China had halted soybean purchases for months earlier this year during tit for tat tariff warfare, costing American farmers billions in lost revenue and forcing many to seek alternative markets or accept storage costs waiting for trade resolution. The agricultural sector’s political importance in swing states gives Trump incentive to emphasize progress on farm exports even when actual volumes remain uncertain and commitments lack specificity.
Andrew Whitelaw of Episode 3 noted that markets expected concrete purchasing agreements rather than vague promises, creating disappointment when neither side provided specific quantities or firm timelines. China’s track record of making similar commitments without full delivery, particularly under the 2020 Phase One trade deal, added to skepticism about whether Beijing would follow through this time.
The trade dispute has pushed China to diversify soybean suppliers significantly, heavily favoring South American nations including Brazil and Argentina that increased market share dramatically while US farmers lost access to their historically largest export market. Rebuilding those commercial relationships requires more than diplomatic agreements; it demands price competitiveness and reliable supply that Brazilian producers now offer.
Xi struck notably conciliatory tone during the photo opportunity at Gimhae Air Base, urging that Washington and Beijing be “friends and partners” and describing it as a “great pleasure” to meet Trump for the sixth time. The Chinese leader said it was only “normal” for the two economic superpowers to have “frictions now and then,” adding that “China’s development goes hand in hand with your vision to Make America Great Again.”
That messaging marked shift from Xi’s meeting with former President Joe Biden late last year, during which the Chinese leader emphasized more “inevitable competition” between the two countries. Analysts interpreted the softer tone as reflecting China’s interest in stabilizing economic relations amid domestic growth challenges including property sector troubles, youth unemployment approaching 20 percent, and deflationary pressures threatening consumer spending.
Besa Deda, Sydney based chief economist, noted in Reuters interview that while the Busan deal signals progress, underlying tensions including technology restrictions and strategic competition remain unresolved. “The response from markets has been cautious optimism,” Deda said, emphasizing investor uncertainty about how long the truce will hold given fundamental disagreements between Washington and Beijing about economic models, technology ambitions, and geopolitical aspirations.
The agreements do not amount to comprehensive trade deal resolving core tensions over technology transfers, intellectual property protection, market access, industrial subsidies, human rights, and Taiwan. Trump claimed after the meeting that a comprehensive deal would be ready to sign “pretty soon,” though observers remain skeptical given complexity of unresolved issues requiring politically difficult concessions from both governments.
Overall tariff rates on Chinese goods remain at historically elevated levels despite the 10 percentage point reduction. The 47 percent average tariff still represents massive increase from pre 2018 levels when tariffs averaged around three percent. These elevated levies continue imposing costs on American consumers and businesses dependent on Chinese manufactured goods and components integrated throughout global supply chains.
Technology, semiconductor, and consumer electronics sectors showed particular enthusiasm for the trade truce, anticipating direct benefits from reduced tariffs and renewed trade flows. Companies like Nvidia, which had provided current quarter estimates excluding H20 chip shipments to China due to export restrictions, could potentially raise guidance if trade parameters clarify and loosen restrictions on advanced semiconductor sales.
Sam Stovall, chief investment strategist at CFRA Research, told CNBC that technology forecasts have been made “without the benefit of China, so once you can add China back into the equation, that would probably be fairly optimistic for the markets.” Big Tech companies might raise guidance based on improved access to Chinese markets, potentially igniting another wave of buying in market segments already dominated by technology heavyweights.
The one year timeline for the rare earth suspension and ownership rule pause creates pressure for both sides to make progress on broader trade negotiations. If talks stall, China could reimpose export controls next October while the United States might restart subsidiary targeting rules and port fees. This dynamic gives both nations incentive to pursue substantive negotiations rather than simply enjoying temporary relief.
Industry analysts suggest the annual renewal structure means uncertainty persists for companies making long term investment decisions about supply chains, manufacturing locations, and technology development. Businesses prefer stable, predictable policy environments enabling multi year planning rather than twelve month pauses requiring constant monitoring of diplomatic relations and trade negotiations.
Wendy Cutler, senior vice president at Asia Society Policy Institute, suggested bilateral deals Trump signed during his Asia trip with Japan, Malaysia, and other nations seeking critical mineral supply security might “benefit immensely from being linked together in a plurilateral agreement with strong commitments, financing and pooling of resources.” She expects more such agreements to follow as Washington pursues supply chain diversification strategies.
Yet building alternative rare earth processing capacity requires years and billions in capital investment. China’s dominance resulted from decades of strategic investment, environmental externalization through lax pollution controls, and integrated supply chains linking mining through final manufacturing. Western nations shuttered rare earth operations during periods when China flooded markets with cheap supply, making restart economically challenging even with government subsidies.
On fentanyl, Trump expressed confidence Xi would “work very hard to stop the flow” of the synthetic opioid and its precursor chemicals into the United States. “I believe he is going to work very hard to stop the death that is coming in,” Trump stated. China has repeatedly promised to reduce fentanyl trafficking but faces accusations from experts of inadequate follow through on enforcement commitments.
China’s Commerce Ministry confirmed both sides reached consensus on “issues such as cooperation in fentanyl control” without elaborating on specific measures Beijing would implement. Skeptics note that previous Chinese commitments on fentanyl have produced limited results, with precursor chemicals continuing to flow to Mexican cartels that manufacture finished fentanyl for the US market responsible for over 100,000 annual American overdose deaths.
Critics argue the deal primarily postpones conflicts rather than resolving them. Fundamental disagreements about China’s state directed economic model, technology ambitions threatening American competitiveness, and geopolitical aspirations challenging US influence in Asia remain unaddressed. The trade war’s underlying drivers persist even as both sides step back from immediate escalation threatening economic damage neither government desires ahead of domestic political considerations.
For global manufacturers, the agreement provides welcome relief from supply chain disruptions that threatened production of everything from smartphones to electric vehicles to military hardware. Yet the reprieve also highlights continued vulnerability to geopolitical tensions affecting access to materials essential for modern technology and clean energy transitions that governments worldwide pursue as climate priorities.
Whether Trump and Xi can build on this temporary truce to achieve more durable trade framework remains uncertain. Success depends on whether political will exists in both capitals to make concessions necessary for comprehensive agreement or whether domestic pressures and strategic competition ultimately prevent meaningful progress beyond temporary pauses in escalation cycles.
The record stock market highs reflect investor relief that worst case scenarios involving runaway tariff escalation and complete decoupling between the world’s two largest economies appear less likely in the near term. Yet the cautious optimism underlying the rally acknowledges that fundamental transformation in US China relations requires addressing strategic competition issues extending far beyond tariff rates and agricultural purchases into technology leadership, military posture, and global influence that neither nation appears willing to concede.
