The US-China Trade "Equilibrium" and Tariff Reset - A Fragile Truce

In November 2025, the US-China trade relationship achieved a precarious "equilibrium" through a landmark tariff reset, averting a full-blown embargo-like escalation that had been looming since April's "Liberation Day" tariffs of the US.

On November 1, Presidents Donald Trump and Xi Jinping finalized a deal in Busan, South Korea, effective November 10, 2025. The US halved its 20% fentanyl-related tariff on Chinese goods to 10%, suspended heightened reciprocal duties until November 2026, and paused new ship fees and entity list expansions – entities ended up on such a list because of 50% or more foreign shareholding and had trade restrictions applied to them. 

For the US economy, the deal injects relief: lower tariffs ease the holiday-season import costs, potentially saving firms significant shipment fees and averting inflation spikes. US Soybean farmers gain from resumed Chinese purchases, boosting agricultural incomes, while secure rare earth flows support EV and defence manufacturing. However, average tariffs remain ~20% on most Chinese imports, sustaining the higher consumer prices and slowing GDP by about 0.2% in the long-term.

China, in turn, lifted rare earth export controls via general licenses, halted fentanyl precursor shipments to North America, ended semiconductor probes, removed US firms from unreliable entity lists, and committed to buying 12 million metric tons of US soybeans by year-end, plus 25 million metric tonnes annually through 2028.

 China will benefit from the restored export access, following a 53% June export slump to the US, and resumed legacy micro-chip production for export to the US.  

This reset reduced tensions and improved relations between China & the US, by reversing threats of a 100% US tariff and a triple-digit “Chinese Tariff War”. Chinese retaliation had initially slashed bilateral trade with 22% early 2025. This reset, set to expire in a year, marks a truce with the effect of stabilising the world economy while allowing the US & China to maintain their core leverage - the US keeps their tariffs on strategic goods and China maintains their mineral processing dominance.