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Busan Agreement: 1 truce, 2 giants & global trade

By Sohail Khan 24 September 2026, 2:09 pm

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Business News›News›International›Global Trends›'Busan Agreement' explained: What the US-China trade truce means for world trade

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'Busan Agreement' explained: What the US-China trade truce means for world trade
Synopsis

US Treasury Secretary Scott Bessent announced the extension of the Busan Agreement until January 10, 2027. This extension allows both sides more time to negotiate without facing immediate tariff threats. The Busan Agreement was initially established to ease trade tensions between the US and China last year. Key areas of focus include agriculture and non-tariff barriers that require further discussion.

Trump Xi — US-China trade truce or 2025 'Busan agreement' explained

The US-China trade truce is getting an extension.

US Treasury Secretary Scott Bessent said on Fox News on Wednesday that Washington and Beijing had agreed to extend the so-called Busan Agreement until January 10, giving the two sides more time to work on their economic relationship.

The agreement was originally due to expire on November 10.

“We have agreed today that we will extend what we call the Busan agreement, the economic detente between the two countries,” Bessent told Fox News, adding that the extension would give them more time to work on the economic front.

Also Read: After Trump-Xi handshake, Bessent says US-China 'Busan Agreement' extended till January 10

The announcement comes after Bessent held talks with Chinese Vice Premier He Lifeng this week. It also keeps in place a truce that has helped prevent the world's two biggest economies from slipping back into the kind of tariff escalation seen last year.

That matters well beyond Washington and Beijing. The US and China sit at the heart of global manufacturing and supply chains, so a fresh trade fight between them can quickly show up in shipping costs, factory input prices, technology supplies and the cost of goods around the world.

So, what is the Busan Agreement?

The Busan Agreement is the name given to the trade truce reached by US President Donald Trump and Chinese President Xi Jinping in Busan, South Korea, in October 2025.

It came after months of escalating tariffs and retaliatory measures between the two countries.

By the time Trump and Xi met, the dispute had moved well beyond tariffs. Washington and Beijing were also using export controls and restrictions involving rare earths, technology, shipping and other strategic areas to put pressure on each other.

The Busan meeting was meant to stop that escalation.

Under the arrangement, the US agreed to reduce some tariffs on Chinese goods, while China agreed to resume purchases of US soybeans, pause new rare-earth export restrictions and take steps against the trade in fentanyl precursor chemicals.

Both sides also agreed to suspend or delay several other measures that had threatened to further disrupt trade.

How did the two countries get there?

The agreement was the product of a trade war that had steadily widened.

Trump's return to the White House in 2025 brought a new round of tariffs on Chinese goods. Beijing responded with tariffs of its own and restrictions on critical minerals.

The confrontation intensified after Trump's so-called “Liberation Day” tariff offensive, when the US announced sweeping new tariffs. China retaliated, and the two sides threatened further measures.

At one point, the tariffs being threatened by Washington and Beijing had crossed 100%, raising fears of a much wider disruption to global trade.

The stakes were particularly high because some of the measures went after areas where one side had significant leverage. China, for example, is a major supplier of rare earths and magnets used in cars, electronics, aerospace and defence.

That put manufacturers around the world on alert.

By the time Trump and Xi met in Busan, the immediate concern was no longer simply how much it would cost to import a Chinese product into the US. Businesses were also trying to work out whether they could continue getting the materials and components they needed at all.

The agreement offered a way to step back.

Also Read: View: The US is badly losing its trade war with China

What did the Busan deal actually do?

The simplest way to understand the Busan agreement is as a series of pauses and commitments aimed at preventing further escalation.

The US cut tariffs on Chinese imports, including the tariff linked to fentanyl-related concerns. China agreed to resume US soybean purchases and pause new rare-earth export controls.

Washington also suspended some technology-related restrictions and measures aimed at China's maritime, logistics and shipbuilding sectors. The two sides agreed to pause retaliatory port fees as well.

Reuters reported at the time that the arrangement broadly rolled back some of the escalation that had taken place during the year. But it did not settle the bigger disagreements between the two countries, including disputes over China's industrial policy, manufacturing capacity and the US restrictions on technology exports.

That is an important distinction.

Busan was a truce, not a full trade settlement.

Why is the latest extension significant?

The latest announcement means the truce will remain in place beyond its original November deadline.

For Washington and Beijing, that creates more room to negotiate without immediately facing another deadline that could trigger a fresh round of tariffs or retaliatory action.

Bessent has indicated that the US wants to use that time to work towards a broader economic understanding rather than simply keep extending individual arrangements.

US Trade Representative Jamieson Greer has also said the two countries are expected to make announcements on agriculture and non-tariff barriers. Traders are watching for progress on an agreed mutual tariff reduction covering about $30 billion in goods, with China potentially able to move first by cutting duties on US agricultural imports.

So there is still plenty to negotiate.

Why should the rest of the world care?

Because the US-China trade relationship is not just a bilateral story.

Together, the two economies account for a huge share of global trade and manufacturing. Products may be designed in one country, assembled in another and rely on components or raw materials sourced from several others.

That makes a major US-China trade confrontation difficult to contain.

The tariff escalation last year offered a clear example. As Washington and Beijing raised duties on each other's goods, businesses had to rethink sourcing, pricing and investment decisions.

The rare-earth dispute added another layer of uncertainty. China has an important position in the supply of rare earths and magnets used across several industries. Restrictions can therefore affect manufacturers that are not based in either the US or China.

Shipping was another pressure point.

The Busan agreement included a pause in duelling port fees imposed by Washington and Beijing on shipping linked to each other's maritime sectors. That helped remove another potential cost and disruption from global trade routes.

For businesses, therefore, the value of the truce is not only in the tariffs that were reduced. It is also in the uncertainty that was avoided.

A manufacturer that knows tariffs, export controls and shipping restrictions will not suddenly change has more room to plan production, source materials and set prices.

Has the US-China trade war ended?

The Busan agreement has reduced tensions, but the issues that produced the trade war in the first place have not disappeared.

Washington continues to raise concerns about China's industrial policies, manufacturing capacity, technology access and trade practices. Beijing continues to oppose US tariffs and restrictions on Chinese access to advanced technologies.

That is why the agreement has been described as a fragile truce rather than a permanent settlement.

Even now, there is unfinished business. Bessent has said some Chinese commitments still need to be implemented more fully, while Washington is looking for further progress in areas such as agriculture and non-tariff barriers.

The extension to January therefore buys time, but it does not remove the underlying tensions.

What happens next?

The new deadline is January 10, 2027.

Between now and then, Washington and Beijing will have to show whether the temporary arrangements can turn into something more durable.

Agriculture and market access will be closely watched in the near term, particularly the proposed tariff reduction covering about $30 billion in goods.

But the bigger test will be whether the two countries can make progress on the harder issues that were left unresolved in Busan.

For global trade, that is the real significance of the latest extension.

The Busan Agreement has given businesses another period of relative calm. What happens during that period will determine whether it becomes the foundation for a more stable US-China trade relationship, or simply another pause before tensions rise again.

(With inputs from Reuters)

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