US and China Cut Tariffs on $US30 Billion of Goods
Trump-Xi summit delivers tariff reductions, an extended trade truce and a new channel for cooperation on artificial intelligence
The United States and China have agreed to reduce tariffs on $US30 billion of goods in each direction and establish a new dialogue on artificial intelligence, following a three-day summit between US President Donald Trump and Chinese President Xi Jinping.
The agreement covers a range of goods traded between the two economies. US exports receiving more favourable tariff treatment include agricultural products, fish and seafood, logs and wood products, cosmetics and medical devices. Chinese exports covered by the arrangement include small appliances, toys, holiday decorations and children's car seats.
Trade truce extended as both sides keep negotiating
The summit also resulted in a two-month extension of the existing trade truce, while Washington and Beijing agreed to establish a trade council and continue discussions reached during earlier negotiations in Kuala Lumpur.
The White House described the tariff agreement as a consensus on more favourable treatment for non-sensitive goods, while China's foreign ministry confirmed that the two sides would continue using established communication channels.
Citi's chief China economist Xiangrong Yu described the outcomes as "modest but practical", arguing that the continuation of talks reduces the immediate risk of another sharp deterioration in US-China relations.
The two countries are also expected to hold further meetings at APEC in Shenzhen in November and the G20 in Miami in December.
AI becomes another area of cooperation
Alongside trade, Washington and Beijing agreed to establish a dialogue focused on the risks and benefits of artificial intelligence.
The next round of talks is scheduled for November, while both countries will create a communication channel for dealing with AI-related incidents.
Citi said the arrangement provides a mechanism for addressing mutual concerns without immediately resorting to measures such as broader export controls. The bank also noted that neither side appears inclined to slow AI development, suggesting the discussions are more focused on managing risks than restricting the technology.
Tariff uncertainty remains an important market factor
The summit did not deliver a broader long-term economic agreement, with Citi noting that the most significant immediate developments were the tariff reduction and the extension of the trade truce.
However, the prospect of continued meetings between Trump and Xi could reduce the likelihood of an abrupt breakdown in relations in the near term. Citi said this could help avoid the type of tariff-driven market volatility experienced previously.
China also agreed to import 10 million tonnes of coal during 2027-28, according to the White House fact sheet.
What it means for investors
For investors, the latest US-China agreements could provide some relief from uncertainty surrounding tariffs, trade restrictions and supply chains. Companies with significant exposure to cross-border trade could be affected by changes in tariff costs and access to key markets.
The next focus will be whether the two governments can extend the current trade truce and build on the latest agreements at upcoming APEC and G20 meetings. Continued dialogue could limit the risk of sudden policy changes, although the longer-term trade relationship remains dependent on further negotiations.
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