Asian equity markets surged Monday as Treasury Secretary Scott Bessent revealed substantial progress in US-China trade negotiations, setting the stage for what could be one of the most consequential trade agreements in recent years. The developments unfolding at the ASEAN Summit in Kuala Lumpur suggest President Trump‘s threatened 100% tariffs are now off the table.
Progress on Critical Issues
Treasury Secretary Scott Bessent announced during recent public statements in Malaysia that negotiators from both nations have reached consensus on several contentious topics after two days of intensive discussions. The Treasury Secretary specifically indicated that China will resume substantial purchases of US soybeans, addressing a key priority for American agricultural producers.
Bessent emphasized in official remarks that soybean markets operate globally, with Brazil, Argentina, and the United States serving as the three leading suppliers. He expressed confidence that market equilibrium has been restored and that China will resume substantial purchases from American producers.
What’s particularly noteworthy here is the breadth of issues reportedly resolved. According to statements from both sides, the framework addresses everything from fentanyl cooperation to export controls, shipping levies, and agricultural imports. This comprehensive approach signals both nations are genuinely committed to de-escalation.
The Tariff Question Remains
While the progress is encouraging, critical details remain unclear. The existing tariff structure still leaves China facing approximately 40% effective tariff levels—roughly 25 percentage points higher than other trading partners. Whether these baseline tariffs will be reduced as part of any final agreement represents the most significant outstanding question.
Chinese officials released statements characterizing the talks as “constructive,” though their communication remained deliberately vague on specifics. Reading between the lines, any progress on fentanyl cooperation could potentially lead to reduction or removal of the 20% fentanyl-related tariffs currently in place.
For President Trump, the agricultural component delivers political value by directly benefiting his core constituency. The soybean purchases alone represent a tangible win he can present to American farmers who’ve been squeezed by trade tensions.
Beyond Trade: Geopolitical Complexity
The discussions extend far beyond traditional trade issues into thornier geopolitical territory. President Trump has indicated his desire for a “comprehensive” deal that includes China’s purchases of Russian oil—a sensitive topic given the close strategic partnership between Beijing and Moscow.
Recent reports indicate Chinese state-owned companies have already canceled some crude oil shipments from sanctioned Russian entities. However, analysts suggest China is unlikely to significantly curtail Russian energy purchases without substantial US concessions, potentially including a shift in America’s long-standing Taiwan policy.
Secretary of State Marco Rubio has publicly stated such policy changes won’t happen. President Trump himself offered less definitive responses when questioned by reporters, saying only that he didn’t want to discuss Taiwan while traveling through Asia, acknowledging the trip’s existing complexity.
Southeast Asia Capitalizes on Trade Realignment
While US-China negotiations dominated headlines, President Trump simultaneously secured multiple trade agreements with Southeast Asian nations. Malaysia, Vietnam, Thailand, and Cambodia all finalized frameworks that provide these countries tariff exemptions in exchange for removing trade barriers and expanding market access for US agricultural products.
The Malaysia agreement notably includes a critical minerals pact focused on rare earth elements—a direct challenge to China’s dominance in this strategically vital sector. Malaysia’s Trade Minister confirmed in recent public statements that the country is actively courting international players, including companies from the US, China, Japan, and Korea, to build rare earth processing capabilities domestically.
“We want to develop downstream,” the Trade Minister explained during official remarks. “We are inviting any players who want to be part of that supply chain to build their supply chain in Malaysia as much as possible.”
These Southeast Asian agreements, while smaller in economic scale than a potential US-China deal, serve an important strategic purpose. They demonstrate to Beijing that Washington has viable alternatives for supply chain diversification, strengthening America’s negotiating position.
South Korea’s Negotiation Challenges
The picture looks considerably less optimistic for South Korea. South Korean President revealed during an exclusive interview that trade negotiations with Washington “remain stuck on all of the major details,” despite reaching preliminary agreement on broad frameworks.
The core sticking points center on a proposed $350 billion investment fund, with unresolved questions about investment methods, amounts, timelines, profit-sharing, and loss allocation. The South Korean leader emphasized his country’s difficult position, caught between US and Chinese economic spheres.
“When it comes to the supply chain, the world is divided into two blocks. One led by the United States and one by China,” the President stated. “Korea is situated geographically and economically between these two. We are situated between two grinding stones.”
Despite these challenges, South Korea remains committed to its alliance with the United States while attempting to maintain functional economic relations with China—a delicate balancing act that will only grow more challenging as US-China competition intensifies.
Market Implications and What’s Next
Financial markets are pricing in optimism about Thursday’s expected meeting between President Trump and President Xi Jinping in South Korea. Asian equity futures jumped, with particular strength in sectors that could benefit from reduced trade tensions. Oil prices gained ground after their best week since June, while safe-haven assets like gold faced selling pressure.
However, investors should maintain perspective. Even the most optimistic scenario likely represents a return to the status quo from earlier in 2025, before escalation threats emerged. That would still constitute a significant win given how dramatically tensions had deteriorated, but it’s not the transformational breakthrough some headlines might suggest.
The rare earth sector faces particular uncertainty. Australia-listed rare earth mining companies declined despite the broader market rally, as traders weigh the implications of US efforts to diversify supply chains away from Chinese dominance.
The Week Ahead
Beyond the Trump-Xi meeting, this week brings several additional catalysts that could shift market sentiment. The Federal Reserve‘s rate decision on Wednesday will clarify the monetary policy outlook, with markets currently pricing in a 25 basis point cut following weaker-than-expected inflation data delayed by the ongoing US government shutdown.
Japan’s political transition adds another layer of complexity. New Prime Minister Sanae Takaichi, who meets with President Trump Tuesday, has pledged expansive fiscal policy and accelerated defense spending to meet NATO‘s 2% GDP target two years early. Her finance minister has already signaled additional debt issuance may be necessary, potentially impacting Japanese government bond markets.
The Bank of Japan‘s policy decision Thursday will test the central bank’s independence amid political pressure. While no rate hike is expected this week, December remains a possibility—assuming political opposition doesn’t intensify.
What comes next
The genuine breakthrough in US-China trade talks appears increasingly likely when Trump and Xi meet Thursday. Both sides have publicly committed to substantial progress, making it politically difficult to walk away empty-handed. The framework for agreement exists across multiple contentious issues.
What remains uncertain is whether this represents merely a tactical pause in strategic competition or the foundation for more stable long-term relations. The geopolitical issues lurking beneath the surface—Taiwan, Russia, technology competition, rare earth dominance—won’t disappear regardless of what trade agreement emerges.
For markets, the immediate relief from escalation risks justifies current optimism. But investors should recognize that US-China economic decoupling continues as a structural trend, even if the pace moderates. Southeast Asia’s emergence as an alternative manufacturing and supply chain hub will accelerate regardless of this week’s negotiations.
The key question isn’t whether a deal gets announced Thursday—that now seems probable. The question is whether it holds, and what it means for the fundamental restructuring of global trade relationships that’s been underway since 2018.