Breakthrough in U.S.–China Negotiations

Global trade tensions entered a new phase this week as Washington and Beijing reached a framework agreement on a trade deal that could ease months of friction between the world’s two largest economies. The accord, announced by U.S. Treasury Secretary Scott Bessent, lays the groundwork for a potential breakthrough when President Donald Trump meets Chinese President Xi Jinping later this week in South Korea.

According to Bessent, the framework includes agreements on TikTok’s U.S. operations, a deferral of China’s rare earth export restrictions, and the resumption of large-scale soybean imports from the United States — a key issue for American farmers. “We have reached a substantial framework that will avert tariffs,” Bessent said, suggesting the 100% tariffs previously threatened on Chinese imports are now off the table.

Beijing confirmed the progress, calling the discussions “constructive” and noting a “basic consensus” on key trade provisions. For both sides, the talks represent a strategic recalibration. The U.S. is seeking to diversify its access to critical minerals through expanded agreements with Malaysia and Thailand, while China aims to stabilize its trade relationships as global supply chains fragment amid intensifying geopolitical competition.

Markets reacted positively to the news, viewing the framework as a signal that Washington and Beijing may be moving from confrontation toward cooperation. Analysts say a finalized deal could inject confidence into global equities and commodities, especially in agriculture, semiconductors, and logistics sectors that have been hit hardest by trade volatility.

Rising Tariff Pressures on Canada

While relations with China appear to be stabilizing, tensions with Canada have worsened. On Saturday, Trump announced a 10% tariff increase on Canadian imports, citing political provocations from Ontario, whose recent television ad criticized the U.S. tariff regime using a vintage clip of Ronald Reagan.

The move underscores a shift in Washington’s approach toward its North American partners. The new tariffs, covering steel, aluminum, and autos, mark a direct challenge to the spirit of the U.S.–Mexico–Canada Agreement (USMCA), which was designed to prevent such unilateral trade actions.

The timing is particularly difficult for Ottawa: Canada’s GDP contracted 0.4% in Q2 2025, while exports plunged 7.5% following earlier tariff implementations. Economists warn that renewed trade friction with the U.S. could deepen the slowdown, especially as manufacturing and resource exports remain heavily dependent on American demand.

Mexico’s Diplomatic Balancing Act

Amid the volatility, Mexico has managed to avoid confrontation — at least for now. President Claudia Sheinbaum said Monday that Trump agreed to extend tariff negotiations for “a few more weeks,” delaying a planned 30% tariff increase on Mexican imports. “Our teams are working very well together,” Sheinbaum said, emphasizing a tone of cooperation rather than confrontation.

The U.S. had previously imposed 25% to 50% tariffs on select Mexican exports, particularly in steel and automotive manufacturing, while granting temporary waivers to allow more time for negotiations. Mexico remains in a “privileged position,” according to Economy Minister Marcelo Ebrard, since more than 80% of its exports are covered under USMCA’s duty-free provisions.

The measured diplomacy contrasts sharply with Canada’s experience, highlighting Mexico’s pragmatic approach to preserving access to its largest export market while maintaining economic stability ahead of 2026 USMCA review talks.

What Comes Next

The simultaneous developments — progress with China, escalation with Canada, and calm with Mexico — illustrate the fragmented nature of U.S. trade strategy under Trump’s renewed administration. Investors and policymakers will be watching closely to see whether the U.S.–China framework becomes a durable trade accord or merely a temporary truce.

For now, markets are cautiously optimistic. The combination of reduced tariff risk with China and continued dialogue with Mexico could stabilize global supply chains. But with tariffs on Canada rising and election-year politics shaping every decision, volatility in North American trade remains far from over.