US, China seek to avoid trade war escalation, salvage Trump–Xi meeting in Malaysia talks

Top economic officials from the United States and China ended their first day of talks in Kuala Lumpur on Saturday (25 October), with a Treasury spokesperson describing them as "very constructive."

The world's two largest economies are looking to avert an escalation of their trade war and ensure that a meeting happens next week between US President Donald Trump and Chinese President Xi Jinping.

The talks, held on the sidelines of the Association of Southeast Asian Nations summit, aim to chart a path forward after Trump threatened new 100% tariffs on Chinese goods and other trade curbs starting on 1 November, in retaliation for China's expanded export controls on rare earth magnets and minerals.

The recent actions, which also include an expanded US export blacklist covering thousands more Chinese firms, have disrupted a delicate trade truce crafted by US Treasury Secretary Scott Bessent, US Trade Representative Jamieson Greer and Chinese Vice Premier He Lifeng over four previous meetings since May.

He smiled and waved to reporters but did not comment as the Chinese delegation left the venue for the talks at Kuala Lumpur's Merdeka 118 tower, the second‑tallest building in the world.

China's top trade negotiator Li Chenggang is also participating in the talks. A Reuters witness saw Li arriving alongside He earlier in the day.

A Treasury spokesperson said: "They have been very constructive, and we expect them to resume in the morning."

The Malaysian government and the US and Chinese sides have provided few details about the meeting or any plans to brief the media on outcomes.

Talking points

The three officials will try to pave the way for Trump and Xi to meet next Thursday at an Asia‑Pacific Economic Cooperation summit in South Korea, a high‑stakes conversation that could revolve around interim relief on tariffs, technology controls and Chinese purchases of US soybeans.

Minutes before the talks started, Trump left Washington for his Asia tour and laid out several talking points for the meeting with Xi.

He said farmers, hit by a Chinese freeze on US soybean purchases, and the democratic island of Taiwan, which China claims as its own territory, would be on the list of topics discussed. Trump added that he does not have any plans to visit Taiwan.

He also flagged the case of jailed Hong Kong media tycoon Jimmy Lai, whose detention has become the most high‑profile example of China's crackdown on rights and freedoms in the Asian financial hub.

"We have a lot to talk about with President Xi, and he has a lot to talk about with us. I think we'll have a good meeting," Trump said.

Trump left Washington on Friday night for a five‑day trip to Malaysia, Japan and South Korea — his first to the region and his longest journey abroad since taking office in January.

Aboard Air Force One, he told reporters that he would also like China to help Washington in its dealings with Russia.

Delicate balance

Josh Lipsky, international economics chair at the Atlantic Council in Washington, said Bessent, Greer and He must first find a way to mitigate their dispute over US technology export curbs and China's rare earths controls, which Washington wants reversed.

"I'm not sure the Chinese can agree to that. It's the primary leverage that they have," Lipsky said.

Some announcements may fall to Trump, who is due to arrive in the Malaysian capital on Sunday.

"We won't know if Beijing has successfully counterbalanced the US's export controls with restrictions of their own or if they've induced a continuation of an escalatory spiral until Trump and Xi meet," said Scott Kennedy, a China economics expert at Washington's Center for Strategic and International Studies.

"If they make a deal, their gambit will have paid off. If there's no deal, then everyone will need to prepare for things to get much nastier."

Rare earths stranglehold

The world's two largest economies are seeking to avoid a return to triple‑digit tariff escalation on both sides.

Bessent and Greer's first meeting with He in Geneva in May led to a 90‑day truce, which brought tariffs down to about 55% on the US side and 30% on the Chinese side, and restarted the flow of magnets. It was extended in subsequent talks in London and Stockholm and was due to expire on 10 November.

But the truce frayed at the end of September, when the US Commerce Department vastly expanded an export blacklist to automatically include firms more than 50% owned by companies already on the list, banning US exports to thousands more Chinese firms.

China struck back with new global rare earth export controls on 10 October, aiming to prevent their use in military systems.

Bessent and Greer blasted China's move as a "global supply chain power grab" and vowed that the US and its allies would not accept the restrictions. Reuters reported that the Trump administration is considering a plan to escalate with curbs on a wide array of software‑powered exports to China, from laptops to jet engines.

The Trump administration added to the tension on Friday by announcing a new tariff probe into China's "apparent failure" to meet the terms of the 2020 US–China "Phase One" trade agreement that halted their trade war during Trump's first term.