US and China start trade talks ahead of Trump and Xi meeting

New deal on critical minerals expected to be signed during US President's trip to Malaysia, Japan and South Korea

He Lifeng, China's Vice Premier, leaves for lunch during a break in a meeting with the US trade delegation in Kuala Lumpur, Malaysia. Bloomberg

The US and China, the world's two largest economies, have begun trade talks before a high-profile meeting between the leaders of the two countries next week in Seoul.

The talks come after the world’s two largest economies engaged in tit-for-tat tariffs that shook global stock and commodity markets.

US President Donald Trump is expected to meet Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Co-operation leaders’ summit in South Korea on Thursday.

Mr Trump will be visiting Malaysia, South Korea and Japan during his Asia trip starting on Saturday.

Officials from the two countries started talks in Kuala Lumpur on Saturday. The first day of trade discussions was "constructive" and they were expected to resume on Sunday, Reuters reported, quoting a Treasury official.

The two sides will "hold consultations on important issues in China-US economic and trade ties in accordance with the important consensus reached by the heads of state of the two countries during their phone calls this year”, Xinhua reported earlier.

The US announced an additional 100 per cent tariff on China this month in a dispute over export controls on rare earth minerals.

Mr Trump said the extra levies, plus US export controls on “any and all critical software”, would come into effect from November 1 in retaliation for what he called Beijing's “extraordinarily aggressive” moves.

“It is impossible to believe that China would have taken such an action, but they have, and the rest is history,” he said on Truth Social.

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The US and China have been jostling for advantage in trade talks after the import taxes announced this year sparked a trade war between the world's two largest economies.

Both nations agreed to reduce tariffs after negotiations in Switzerland and the UK, yet tension remains as China has sought to restrict America's access to the difficult-to-mine rare earths needed for a wide array of US technologies.

“The meeting could have a strong impact on economic and trade expectations as well as on financial markets, as investors monitor the outcome of the meeting after a new wave of tensions,” Dat Tong, senior financial markets strategist at trading platform Exness, told The National.

“The discussion could lead to a temporary pause on new tariffs in exchange for a pathway to renewed Chinese purchases of US agricultural goods, like soybeans.”

However, frictions persist, including US curbs on technology exports and China's strategic use of mineral controls, he added.

“Consequently, any truce would be fragile and tactical. If the talks fail, tensions could escalate rapidly, with the US likely proceeding with tariff hikes and China fully enforcing its new export restrictions, which could strongly affect the global economy.”

US Treasury Secretary Scott Bessent is accompanying Mr Trump. He will meet Chinese Vice Premier He Lifeng to discuss trade between the two countries in Malaysia, according to a statement by the Treasury Department.

The US is expected to sign deals related to critical minerals during the trip, as Washington aims to secure supplies used in many industries, including electric vehicles.

Mr Tong said the US is heading towards de-risking its critical mineral supply chains through a web of strategic agreements.

“The new US-Australia framework is a cornerstone of this effort, launching an $8.5 billion project pipeline. Similar deals could continue to emerge as the US seeks to reduce its reliance on China and build a stronger supply chain as it continues to focus on semiconductors and AI as a vector for growth,” he said.