US Dollar Squeezing Every Bit of Powell’s Hawkishness

Forex

Summary:

USD stays supported after Powell’s hawkish tone, but further gains look limited due to weak data flow. Japan signals concern over yen weakness, ECB easing looks unlikely, and UK politics pose mild GBP risk.

The US dollar enjoyed a second round of support yesterday as Powell’s relatively hawkish press conference continued to resonate with data-starved markets. But the conditions for another big leg higher in USD aren’t there, in our view. Meanwhile, Japan has intervened verbally to curb JPY volatility, and GBP is looking closely at Reeves’ political position

USD: Further Gains Harder to Justify

The US dollar found more support yesterday on the tail effect of Fed Chair Powell’s hawkish press conference and, more marginally, the US-China trade deal (on the latter, we recommend our commodities team’s rare earths note). Throughout September and October, we have discussed how short-dollar trades clearly hit a roadblock and needed to be fuelled by more compelling negative USD news.

The government shutdown has prevented jobs data from offering that catalyst, and Powell’s caution on a December cut has to be taken more at face value now.

But our short-term call on the dollar remains more one of ‘lack of direction’ rather than the initiation of a more sustainable rebound. And the reason is precisely the lack of data releases, which incidentally prevents markets from making any conviction call on slower Fed easing. In our view, DXY lacks the thrust to break above 100.0. Today, the PCE report should be delayed.

In Japan, USD/JPY is now obviously causing concerns for authorities. Finance Minister Satsuki Katayama said overnight that the yen’s “very one-sided and rapid currency” moves are being watched with a “high sense of urgency”. This confirms it’s officially the rate of change rather than the level that matters, although previous instances of BoJ FX intervention tell us that psychological levels play a role too. This time, there is a larger question mark on whether the US will condone FX intervention.

Markets may be willing to test whether 155.0 is a line in the sand – inaction around that level could prompt more speculative long USD/JPY bets. However, hot Tokyo CPI and industrial production overnight raise the chance of a December hike, which is our base case, but only 45% priced in by markets.

EUR: Bar for More ECB Easing Is High

It’s abundantly clear that the ECB wants to keep things boring at this stage. Here are our ECB watcher Carsten Brzeski’s takes on yesterday’s statement and press conference. The only real highlight was the shift from a ‘balance of risk’ wording to a broader set of upside and downside risks to growth. Lagarde acknowledged some downside risks had eased, but didn’t give much weight to the shift in wording. Admittedly, eurozone growth was better than expected in 3Q (0.2% QoQ), largely due to surprisingly strong French numbers (0.5% QoQ).

The coming weeks will see Governing Council members offering their nuances to the policy-inflation-growth assessments. But don’t expect much. The ECB is clearly in a ‘good place’ at 2% and the bar for more easing remains high.

Anyway, EUR/USD remains entirely a function of dollar moves, and post-FOMC price action is leading to speculation of a potential break below 1.150. We don’t see the conditions for another big leg lower in the pair, though. Jobs data need to confirm Powell’s more cautious stance, and we doubt the bar is much higher for a Fed dovish repricing should US jobs deterioration continue.

The contribution of the euro is small, but a slight improvement in the growth story and a firm ECB cannot harm. Our call remains bullish on EUR/USD into year-end.

GBP: A Surprise Reeves Resignation Would Be Bad for Markets

We published a market guide to the UK Autumn Budget yesterday, looking at four different scenarios and their impact on gilts and the pound. In our baseline scenario, Chancellor Rachel Reeves delivers a combination of tax hikes whilst avoiding the more inflationary measures. That has gradually been priced in by markets via some dovish BoE repricing, lower gilt yields and a weaker pound. Our post-budget EUR/GBP target is 0.880 on the back of that.

One source of risk for gilts and GBP, even before any clearer details on the Budget emerge, is from opposition calls on Reeves to resign following her admission of failing to obtain a required license to rent her home. The story slightly deflated yesterday as PM Starmer fully backed Reeves and a real estate agency took the blame for the error.

In July, when Reeves appeared close to leaving her post, gilt yields spiked. Markets are wary that a change in Chancellor could herald more relaxed fiscal rules and additional borrowing, at a time when gilt issuance remains elevated. A surprise resignation, which looks unlikely, would, in our view, cause elevated volatility in gilts and the pound.

Source: investing

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Adam

Commodity

Light Crude Slips Toward Key Support as Supply Pressures Mount

Light crude oil futures are edging lower on Friday, consolidating for a third straight session as traders weigh growing global supply against weak demand signals. WTI crude remains under pressure, heading for its third consecutive monthly decline, dragged by a stronger U.S. dollar and sluggish economic data from China.

At 09:47 GMT, Light Crude Oil Futures are trading $60.24, down $0.33 or -0.54%.

Dollar Strength and China Data Pressure Prices

A firming U.S. dollar continued to weigh on commodity markets, limiting appetite for dollar-denominated assets like crude. The greenback gained traction after Federal Reserve Chair Jerome Powell pushed back on expectations for a December rate cut.

Meanwhile, sentiment took another hit after official data confirmed that China’s factory activity contracted for a seventh consecutive month in October, reinforcing concerns about tepid demand from the world’s second-largest oil consumer.

Supply Growth Outpaces Demand

The market is grappling with a clear oversupply narrative. According to analysts, October’s roughly 3% drop in both Brent and WTI reflects a structural imbalance as global production increases outpace demand growth. Recent reports show OPEC and key non-OPEC producers have added more than 2.7 million barrels per day to the market, representing about 2.5% of global supply.

Top exporter Saudi Arabia posted crude exports of 6.407 million bpd in August—the highest level in six months—with volumes projected to rise further. In the U.S., the Energy Information Administration reported record production of 13.6 million bpd last week, underscoring persistent supply pressure.

OPEC+ Output Decisions Loom Ahead of Sunday Meeting

Market attention is now focused on the upcoming OPEC+ meeting, with sources indicating the group is leaning toward a modest output boost in December. This stance contrasts with ongoing Western sanctions on Russian exports, which have yet to significantly impact flows to top buyers China and India.

Although U.S. President Donald Trump suggested China may begin large-scale purchases of American oil and gas, analysts remain cautious. Barclays noted that Alaska, the likely source of any energy exports under the potential deal, accounts for just 3% of total U.S. crude production, minimizing its market impact.

Oil Prices Forecast: Bearish Outlook Holds as Technicals and Fundamentals Align

Oil News: WTI Nears Key Fibonacci Support Zone as Oil Demand Outlook Weakens_1

Daily Light Crude Oil Futures

With WTI crude failing to hold recent lows and approaching a key Fibonacci support zone between $59.27 and $58.49, downside risks remain elevated. A breakdown below the 61.8% retracement at $58.49 could trigger further selling and open the door to a retest of the October 20 low at $55.96.

Upside potential appears capped by the 50-day and 200-day moving averages at $61.45 and $61.97, respectively. Unless a fundamental shift occurs, oil prices are likely to remain under pressure in the near term.

Source: fxempire

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

The Canadian prime minister, Mark Carney, has warned that the era of free trade and investment that formed the foundations of the postwar global economy has ended.

In a stark message to Asia-Pacific leaders at the Apec summit in South Korea on Friday, Carney said rules-based open trade no longer worked in a global economy that was undergoing one of its most profound periods of change since the fall of the Berlin Wall in 1989.

“The old world of steady expansion of rules-based liberalised trade and investment, a world on which so much of our nations’ prosperity – very much Canada’s included – is based, that world is gone,” Carney told a business event on the opening day of the summit in the historical town of Gyeongju.

Carney indicated that Canada would edge away from its traditional dependence on trade with the US, saying it aimed to double non-US exports over the next decade.

Later, in the first formal meeting between Canadian and Chinese leaders since 2017, Carney said he looked forward to working more closely with the Chinese leader, Xi Jinping, to “help build a more sustainable, inclusive international system”.

Xi invited Carney to visit China, adding that ties between the two countries had shown signs of recovery after years of tension under Carney’s predecessor, Justin Trudeau. “Recently, with the joint efforts of both sides, China-Canada relations have shown a recovery toward a trend of positive development,” Xi told Carney.

“China is willing to work with Canada to bring China-Canada relations back to the right track.”

Carney responded: “I also welcome the invitation to come to China to further the dialogue and I very much look forward to doing so,” adding that he looked forward to “constructive and pragmatic dialogue”.

His declaration of the demise of “rules-based” free trade came days after Xi and Donald Trump backed away from an all-out trade war – a truce that was greeted with relief by world leaders, but which was also a reminder of deep-seated differences between the leaders of the world’s two biggest economies.

Carney said earlier this month that Canada would resume trade negotiations with the US only “when the Americans are ready” – an apparent reference to Trump’s decision to immediately end “all trade negotiations” over a television advertisement opposing US tariffs that quoted the former US president Ronald Reagan.

The advert, which was paid for by the government of the Canadian province of Ontario, uses excerpts of a 1987 speech in which Reagan said that “trade barriers hurt every American worker”.

Earlier on Friday, Xi mounted a robust defence of free trade, according to the Chinese foreign ministry, in an apparent swipe at Trump’s “America first” protectionism.

“The more turbulent the times, the more we must work together,” Xi said during a closed-door session. “The world is undergoing a period of rapid change, with the international situation becoming increasingly complex and volatile.”

The two-day summit has been eclipsed by Trump’s crucial talks with Xi on Thursday, when they agreed to withdraw their most extreme tariff and export control threats.

Supply chains and free trade continued to dominate discussions among Apec’s 21 members at the summit, with the US represented by the US treasury secretary, Scott Bessent.

While Trump chose to skip the talks after reaching a deal on rare earth minerals, soya beans and tariffs with Xi, the Chinese leader was positioning himself as the champion of free and open trade. Aside from Carney, he met Japan’s new prime minister, Sanae Takaichi, and is expected to hold talks with the South Korean president, Lee Jae-myung, on Saturday.

Carney is reportedly aiming to restart broad engagement with China – Canada’s second-biggest trading parter – after years of tension and amid a rapid deterioration of Canada’s ties with the US since Trump won his second term in the White House.

Under Trudeau, the Chinese government detained and executed Canadian nationals and interfered in federal elections, according to Canada’s security authorities.

US officials defended Trump’s departure from the summit straight after his talks with Xi – a decision critics say demonstrated his lack of engagement with Apec countries, which together account for 40% of the world’s population and 50% of trade.

When asked why Trump had left on the eve of the leaders’ summit, Casey Mace, a senior administration official, said the US’s contribution in Gyeongju had been “very strong and robust”.

Washington’s engagement in the region was in evidence in Malaysia, where the US defence secretary, Pete Hegseth, met his counterparts from China and India on Friday at the start of an Asean defence summit.

In a post on X, Hegseth said he had told his Chinese counterpart, Dong Jun, that the US would “stoutly defend its interests” and maintain the balance of power in the Indo-Pacific. He also voiced concern about Chinese military activities in disputed areas of the South China Sea and around Taiwan.

The US and India signed a 10-year defence cooperation framework that Hegseth hailed as “a cornerstone for regional stability and deterrence”.

Xi’s first encounter with Takaichi was potentially the most awkward of his round of bilateral meetings. Japan’s first female prime minister is hawkish on China’s military buildup in the region and has targeted wealthy Chinese people in calling for a crackdown on foreigners who buy up property and other assets in Japan.

Takaichi and Xi said they wanted to build a “strategic and mutually beneficial relationship”, despite longstanding differences over historical and territorial issues.

“Japan and China share responsibilities for the peace and prosperity of the region,” Takaichi said. “While there are various pending issues and challenges between our countries, I hope we can reduce those and increase dialogue and cooperation.”

Xi reportedly said he wanted to keep communicating with Takaichi to keep bilateral ties “on the right track”.

Takaichi is a historical revisionist who has sought to play down Japanese atrocities in occupied China and other parts of Asia before and during the second world war, and has made pilgrimages to Yasukuni, a shrine in Tokyo that honours Japan’s war dead, including class-A war criminals.

Takaichi, who skipped a visit to Yasukuni shortly before she became prime minister, told parliament last week that Japan would increase defence spending to 2% of GDP by the end of March, two years earlier than planned.

Tokyo and Beijing have yet to resolve several sources of bilateral friction, including Chinese import restrictions on Japanese seafood and agricultural products – imposed after Japan started releasing treated wastewater from the damaged Fukushima Daiichi nuclear power plant in August 2023 – and a long-running territorial dispute over the Senkaku/Diaoyu islands in the East China Sea.

Source: Theguardian

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Adam

Commodity

Oil, in particular, has experienced some of its largest intraday movements since the Twelve-Day War in June. This article summarizes recent developments and then briefly examines the charts of XAUUSD and USOIL.

Although threats of new tariffs on China by the American government contributed to uncertainty and gains for gold earlier this month, these seem to have calmed down somewhat recently. On 22 October, Donald Trump confirmed plans to meet his Chinese counterpart Xi Jinping, at which some degree of compromise seems possible, while exports of rare earth metals have moved out of traders’ focus. Two more cuts by the Fed before the end of the year have been entirely priced in with a 98% probability according to CME FedWatch.

The American government ordered the freezing of all US-based assets of Lukoil and Rosneft this week and threatened secondary sanctions on foreign banks that expedite purchases of oil from these companies. This is a potentially significant move because it could strongly affect supplies of oil to China, India, and other smaller countries, which are primary markets for Russian oil; the shortfall would need to be made up with supplies from elsewhere, likely boosting demand for oil from Gulf countries.

The key releases coming up in the next few weeks are American inflation, currently scheduled for Friday, 24 October, the Fed’s meeting and nearly certain cut on 29 October, and the double NFP on 7 November covering both September and October. The ongoing shutdown of the American government has significantly disrupted the regular release of data and is likely to mean that upcoming figures are at least somewhat less reliable.

Gold Unlikely to Push Back Below $4,000 for Now

The week beginning 20 October has so far been the largest weekly loss for gold in five years, as the focus on trade wars has declined and most other major fundamental factors appear to be priced in. There was significant profit-taking on 17 and, particularly, on 21 October. With the meeting between Donald Trump and Xi Jinping expected to go ahead on 31 October in Korea, the current dispute seems unlikely to escalate again in the meantime, but any unexpected escalation could drive gold higher once more.

The price held above $4,000 on 22 October with a strong, continuing upward reaction, making this round number a possibly practical as well as psychological support. The same day’s long-tailed doji would also suggest less demand for selling and reluctance to push lower. The 20 SMA is also in view as a potential short-term dynamic support.

Now that there’s no longer an overbought signal from either Bollinger Bands or the slow stochastic, there could be more gains back to the record high or possibly higher if fundamentals support. Buying volume has increased enormously in the last several days of trading, but an immediate push above $4,400 might be too aggressive an expectation.

Oil Jumps After New US Sanctions on Russia

New sanctions against Lukoil and Rosneft by the USA pushed oil up recently as traders worried that threatened secondary sanctions on banks working with these companies could disrupt supply to China, India, and other importing countries. While this has alleviated recent concerns about significant oversupply, the medium-term effects are not yet clear.

$54.75-56 seems to be confirmed as an area of support on the weekly chart, with 17-20 October having been the third unsuccessful test. The crossover of the slow stochastic in oversold and a clear break above the 20 SMA might normally be a strong buying signal, but volume doesn’t clearly support the bounce yet.

The 50 SMA from Bands, which is currently being tested, appears to be an important short-term dynamic resistance. Confirmation of more gains might come from a daily close clearly above $62. Beyond that, the 200 SMA, just below $64, is likely to be a strong resistance from which a breakout would probably require a significant uptick in buying volume.

Source: fxempire

Risk Warnings and Disclaimers

Add to Favorites

Winkelmann

Political

Forex

Economic

Hundreds of thousands of ultra-Orthodox Israelis, known as the Haredim, gathered in Jerusalem on Thursday for a mass rally against the arrests of yeshiva students accused of evading military service.The rally is described by Israeli media as a 'rare show of unity' between the divided Haredi factions, who are often in opposition regarding politics and state relations. The demonstration, named "Cry of the Torah," was endorsed by nearly all ultra-Orthodox leaders, who instructed followers to attend and maintain order.

Source: Flash90

Only the Jerusalem Faction, led by Rabbi Azriel Auerbach, refused to participate, accusing organizers of failing to demand the full reinstatement of the long-standing Torato Omanuto exemption system that allows Torah students to defer military service.The exemption is central to the ultra-Orthodox Jewish way of life, allowing yeshiva students to dedicate their time solely to the study of the Torah instead of army duty, a principle many Haredim see as vital to preserving their religious identity. Torah study is viewed by the ultra-Orthodox as a form of spiritual service to the nation, equal in importance to military duty.

"After it was not made clear to me that the purpose of the rally is to publicly declare that the ultra-Orthodox community demands the reinstatement of the Torato Omanuto arrangement … I cannot instruct participation in this rally," Auerbach said in a public letter.Organizers said the gathering was not against the draft exemption law itself but against the arrests of students labeled as deserters. "The debate over the law is still ongoing, and it belongs in the Knesset," a source explained. "But following the arrests and persecution against us, it was decided to protest nonetheless."

The event featured no speeches or a central stage. Instead, rabbis stood separately in different locations while crowds recited psalms and prayers."Some will stand on balconies overlooking the streets where the rally is taking place, and others will stay in their cars," one organizer said, adding that coordinating a central platform for such large numbers was "impossible."An official notice instructed women to pray separately, stating that "women of Israel from the city of Jerusalem who wish to take part in the event will gather in a designated area," while others were asked to "join the prayers from wherever they are."

The protest was convened after Lithuanian leaders, Rabbis Dov Landau and Moshe Hillel Hirsch, called for action following the arrest of several yeshiva students. Their decision prompted Shas and Agudat Yisrael leaders to join, forming a unified coordinating committee across factions.

Police prepared for potential disturbances by hardline followers of Rabbi Zvi Friedman, whose group disrupted a Supreme Court hearing a day earlier. "We expect that the police will use full force against them so they don't turn our prayer rally into a violent event," a source warned.A counter-protest was organized nearby by the "Coalition of Service Organizations and Families of Reservists," including bereaved families and wounded soldiers.Prominent ultra-Orthodox leaders have repeatedly urged their followers to ignore military recruitment orders following the Israeli High Court's ruling that yeshiva students must be drafted into military service amid Israel's enlistment crisis in the army.

The legislation was introduced in 2024 amid mounting losses in Gaza, aiming to replenish dwindling manpower as the Israeli army struggled to sustain operations while facing an unprecedented shortage of recruits.

Source: Zero Hedge

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Adam

Stocks

World shares were set for a seventh straight month of gains and the dollar was near a 3-month high on Friday after Amazon and Apple's earnings reinforced global tech optimism and the hope that massive AI spending will ultimately bolster growth.

European stocks started modestly lower ahead of euro zone inflation data later and after the European Central Bank on Thursday had further dampened talk of another euro zone interest rate cut any time soon.

Nasdaq futures jumped 1.1% and S&P 500 futures gained 0.6%, though, after forecast-busting Amazon earnings (AMZN.O), sent its shares up more than 11% in pre-market trading and a prediction of bumper iPhone sales sent Apple's (AAPL.O) up over 2%.

That offset overnight tumbles in Meta (META.O) and Microsoft (MSFT.O) amid worries about their surging AI spending. Six of the "Magnificent Seven" U.S. tech megacaps have now reported, with Nvidia - which has just become the world's first $5 trillion company - due to report in three weeks' time.

In Asia, Japan's Nikkei (.N225) had rallied over 2%, boosting its weekly and monthly gains to 6% and 16.4%, respectively. That was the largest monthly rise since 1990, turbocharged by hopes for aggressive fiscal stimulus under new Prime Minister Sanae Takaichi.

This week has also seen the Bank of Japan hold interest rates steady despite many economists predicting a hike.

Chinese blue chips (.CSI300) and Hong Kong's Hang Seng (.HSI) both skidded roughly 1.5% though after data showed China's factory activity contracted at the fastest pace in six months in October.

Investors also locked in gains after a trade truce reached by U.S. President Donald Trump and Chinese President Xi Jinping, which will lead to reduced U.S. tariffs on imports of Chinese goods and continued rare earth exports from China.

World shares head for 7th month of gains; dollar near 3-month high_1

Global stock market performance since US election in Nov 2024

SUBTLE SHIFTS

This week, major central bank meetings have delivered decisions that have subtly shifted expectations. The biggest surprise came from Federal Reserve Chair Jerome Powell who pushed back against the market's sanguine view about a rate cut in December.

Both Treasuries and European government bonds were steady on Friday, but were set for weekly losses.

Two-year Treasury yields were flat at 3.6085%, having risen 12 basis points this week already, while the 10-year yield was steady at 4.0969% and up 10 bps for the week.

Germany's 10-year Bund yields , the euro area's benchmark, were up 1.5 basis points on the day at 2.65% and set for a weekly rise of 2.5 bps.

The rise in yields offered support to the U.S. dollar (.DXY) , which was holding near three-month highs at 99.5 against its major peers, although resistance seems heavy at 99.564 and 100.25.

The euro was flat at $1.1569 after the ECB kept its rates at 2% for the third meeting in a row and sounded moderately more positive on growth prospects.

The central bank also published a survey on Friday showing euro zone bloc firms are seeing a slight improvement in business conditions and that investment into sectors like artificial intelligence is booming.

"What the data this week suggests is that maybe we have got something fundamentally wrong about the impact of trade tariffs," Morgan Stanley's Chief Europe Economist Jens Eisenschmidt said, also highlighting the boost from AI.

"It doesn't make me revise anything dramatically, but it makes me think."

In the commodities markets, oil prices fell and were headed for a third straight monthly fall as a stronger dollar capped gains and rising supply from major producers offset new Western sanctions on Russian exports.

Brent crude futures slipped 0.9% to $64.55 a barrel, while U.S. West Texas Intermediate crude was at $60.10, down 0.8%.

Spot gold prices retraced some of the overnight gains and were down 0.3% to $4,008 per ounce. They were down 2.5% for the week and well below the record high of $4,381 hit just last week.

Source: reuters

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

Three-digit tariffs are off the table, but import duties on each other are higher than in January.

Rare earth materials will flow more smoothly, but China has put in place an export permitting regime that it can tighten or loosen as needed.

Port fees will go away, but only for one year.

And Beijing is again buying U.S. soybeans after it had abruptly cut off American farmers.

After months of posturing, arguing and threatening, U.S. President Donald Trump and Chinese leader Xi Jinping have essentially turned back the clock. While the meeting between the two leaders was hailed by Trump as a “roaring success,” the agreement that came out of it may only serve to undo some of the damages Trump inflicted with his trade war upon his return to the White House.

“It is hard to see what major gains the U.S. has made in the bilateral relationship relative to where things stood before Trump took office,” said Eswar Prasad, an economist at Cornell University.

On the Senate floor, Minority Leader Chuck Schumer on Thursday denounced the deal out of South Korea as leaving the U.S. as “no better off.”

“If anything, things are worse: Prices have gone up and China has agreed to nothing of substance that will improve trade between our nations,” the Democrat senator said, adding that Trump “started a trade war, created a giant mess for businesses, consumers, and soybean farmers, and then he celebrates for trying to clean up the very mess he created in the first place.”

Nevertheless, the deal has injected a degree of stability, giving the world’s two largest economies — as well as the rest of the world — time and room to readjust.

Washington and Beijing still need to finalize their agreements, a process that always has the potential for fresh disputes. But for now, Xi appears interested in moving past the latest tensions.

In an official statement, Xi referred to “recent twists and turns” that “offered some lessons for both sides.” He said they should be “focusing on the benefits of cooperation rather than falling into a vicious cycle of mutual retaliation.”

Both sides reduce tariffs, resume soybean sales to China

Trump fired the first shot in the trade war in February when he imposed an additional 10% tariff on Chinese goods over the allegation that Beijing failed to stem the flow of chemicals used to make fentanyl. That soared to as much as 145% after China retaliated, but Trump walked it back following market meltdowns.

The two sides in May slashed their massive tariffs to 10% on each other, while Washington retained the 20% fentanyl-related tariff, and China its retaliatory tariffs of 10% or 15% on U.S. farm goods.

Now, Trump said he has removed one 10% fentanyl tariff in exchange for Beijing’s cooperation in fighting the illicit drug.

U.S. Secretary of Agriculture Brooke Rollins said China would also withdraw the retaliatory tariffs on U.S. agricultural products. A spokesperson for the Chinese Ministry of Commerce said Beijing would “adjust accordingly” its countermeasures without giving details.

In addition, China has agreed to buy 12 million metric tons of U.S. beans through January, and will buy at least 25 million metric tons annually for next three years, Rollins said on Thursday.

That compares to China buying 17 million metric tons of U.S. soybeans in the first eight months of this year but importing zero in September. In 2024, China bought 22 million metric tons of U.S. soybeans, according to state media.

Although China did not confirm the details of the latest soybean deal, the spokesperson for the Chinese commerce ministry said the two sides have reached “consensus” to expand agricultural trade.

One-year truce on export controls and port fees

In April, China used its monopoly power in the processing of critical minerals to institute a permitting requirement for the export of several rare earth elements. On October 9, Beijing expanded the export rules, apparently in response to the U.S. decision to extend export controls to businesses affiliated with already-blacklisted foreign companies.

Furious, Trump threatened to impose a new 100% tariff on China, but the two sides managed to cool down in time for Trump to meet Xi in South Korea.

Beijing on Thursday said it would pause for a year the rare earth export rules from October to “conduct research to refine specific plans,” while the U.S. will suspend its affiliate rule for one year.

The delay by Beijing “provides just enough time for the United States to accelerate investment in capabilities and innovation for rare earths and permanent magnets,” said Wade Senti, president of the U.S. permanent magnet company AML. “This needs to be on warp speed and at a scale never seen before since the COVID-19 response,” he said.

Another fresh thorn was the U.S. introduction of port fees in October targeting China-linked vessels, as part of a plan to restore America’s shipbuilding capabilitie s. Beijing answered with countermeasures against the U.S.

The port fees on each other are not removed but will be suspended for one year, the Chinese commerce ministry said.

The future is still uncertain

Whether Trump accepts a return to the status quo or pushes to address fundamental issues that have persisted for years between the U.S. and China remains unclear. Nothing about Thursday’s meeting — the first between Trump and Xi in six years — affects Chinese manufacturing dominance that Trump has blamed for the loss of American blue collar jobs.

Sean Stein, president of the U.S.-China Business Council, called the latest developments “very encouraging” and added: “We hope that future negotiations will address long-standing market access barriers, help level the playing field for U.S. companies, and bring long-term predictability to the bilateral trade relationship.”

There are more opportunities on the horizon to keep working on these challenges. Trump said he will go to China in April and Xi will visit the U.S. after that.

If Trump isn’t successful, this period could be remembered for a lot of sound and fury but no change in the basic trajectory of China’s ascendant economy.

“Generally, Trump grows impatient with anything beyond the immediate, and it is the Chinese that play for longer term advantage,” said Kurt Campbell, a former deputy secretary of state in the Biden administration and now chairman of The Asia Group.