(Not So) Fun Fact: In response to the Ontario government running a TV ad depicting President Reagan’s support for free trade, President Trump imposed an additional 10-percent tariff on Canada, raising the U.S. tariff rate to 45 percent.

Frameworks for Trade Agreements in Asia

What’s Happening: During this week’s trip to Asia, President Trump announced trade deals with Vietnam, Japan, South Korea, Cambodia, Thailand, and Malaysia, providing long-awaited details on the White House website. These deals were a mix of formalizing past handshake agreements, announcing new partnerships on rare earths, and expanding market access for U.S. companies. While there is much to be said about the deals, all eyes were on today’s U.S.-China trade talks, as this represents the most consequential trade relationship in the world. The discussion involved China’s export controls on rare earths, the threatened 100-percent U.S. tariff on Chinese goods, port fees on cargo ships, and soybean purchases. Treasury Secretary Bessent met with his Chinese counterparts earlier in the week, with both parties agreeing to a framework for a trade agreement that was further discussed today. After the talks between President Trump and Chinese leader Xi Jinping concluded, Trump stated he will cut the fentanyl-related tariff on China from 20–10 percent and may consider loosening semiconductor export controls, while Xi has agreed to a one-year pause on rare earth export controls and that China will continue purchasing U.S. soybeans.

Why It Matters: The trade deals and frameworks published this week represent a big step forward for the Trump Administration’s trade policy, as many of these agreements are now signed documents rather than just Truth Social posts. The deals with Cambodia and Malaysia, for instance, were signed by President Trump and the leaders of each country which provides more weight behind enforcement. The deals with Vietnam and Thailand have not yet been signed, but joint statements suggest the frameworks will be formalized in the next few weeks. The Vietnamese and Thai frameworks provide key details on commercial deals, market access for U.S. firms, and planned reductions in each country’s trade barriers. The agreements with Japan and South Korea – initially announced back in July – were also formalized and expanded upon to include technology and critical mineral cooperation deals.

Together, these deals include commitments to purchase U.S. aircrafts, energy, and agricultural products worth tens of billions of dollars, not to mention significant investments in shipbuilding, rare earths, energy, and artificial intelligence. While these agreements are geopolitically and economically beneficial, it is important to highlight that U.S. tariff rates will stay between 15–20 percent, substantially higher than 2024. Based on 2024 imports from these Asian countries valued at $540 billion, the Shipment estimates the annual tariff cost to be approximately $50 billion. These tariff costs for U.S. businesses and consumers will likely fall over time, however, because the agreements have clauses that allow certain imports to receive a zero-percent reciprocal tariff rate. The number of products that receive this treatment will likely be subject to continued negotiations and lobbying going forward.

Now let’s talk about China. President Trump hailed the meeting with Xi as a 12 out of 10 success, with Trump agreeing to visit China in April 2026. As part of the agreement, the United States will reduce the fentanyl-related tariff on China from 20–10 percent, abandon the threatened 100-percent tariff on Chinese goods, and the Section 301 investigation into Chinese shipbuilding will be postponed, preventing any additional U.S. tariffs. In return, China has agreed to a one-year pause on rare earth export controls, purchase 12 million metric tons of U.S. soybeans by January and a minimum of 25 million metric tons annually for the next three years, and cooperate more with U.S. efforts to stop the flow of fentanyl precursor chemicals. According to Secretary Bessent, a signed trade deal between the two countries – which could come as soon as next week – which may provide more insight on the final details. Still up in the air are U.S. export controls on Nvidia chips, the fate of TikTok, and a claim by Trump that China will purchase U.S. energy. Overall, this agreement represents more of a truce than a breakthrough in U.S.-China relations as each of the terms returns trade to the status quo. The one-year rare earths deal is the most important aspect of the deal and will be renegotiated by both parties on an annual basis going forward, meaning this is a short-term solution to a strategic vulnerability for the United States. The biggest winners from the de-escalation of this trade war are likely U.S. consumers and businesses since a lower tariff on China reduces annual tariff costs by close to $18 billion.

Looking Ahead: There are a few ways to interpret the impact these trade deals will have for U.S. trade policy. The optimistic perspective is that these agreements will be upheld and usher in greater market access for U.S. firms. At the same time, U.S. tariffs will slowly decrease as imports are added to the zero-percent reciprocal tariff list. This means that tariffs may remain high on paper but may be hollowed out in practice. Alternatively, the pessimistic perspective suggests that although these deals have been signed, a future disagreement may result in a termination of the terms. The deals allow for either party to terminate the arrangement or impose tariffs “to protect its economic or national security.” It also happens to be the case that the memorandums of understanding are not legally binding and only offer commitments to lower non-tariff barriers, which could be ignored in practice. More likely than not, the impact of the Asia trade deals will fall somewhere in the middle of these two perspectives and will depend on President Trump’s perception of each deal’s success.

The trade deal with China – once formally signed – will be a crucial step toward a normal trade relationship that provides calmer waters for businesses looking for stability. While this deal may be one step forward, the months leading up to this moment resulted in U.S.-China relations taking two steps backward. Tariffs remain high, the rare earths export control deal is a paused conflict rather than a return to the free flow of minerals, and the livelihoods of many U.S. farmers are subject to the ability of two governments to get along rather than the decisions of market participants. Also worth mentioning is the fact China agreed to purchase $200 billion in soybeans and other agricultural products during Trump’s first term, a promise that was never fulfilled. It is only a matter of time before an additional dispute arises, whether that be due to the failure of China to crackdown on precursor fentanyl chemicals or the annual renegotiation of the rare earths deal. The question is not whether tensions will flare back up, it is when.