Busan Agreement: 1 truce, 2 giants & global trade

The US-China trade truce, known as the Busan Agreement, has been extended until January 10, according to US Treasury Secretary Scott Bessent. The agreement, initially set to expire on November 10, provides additional time for the two nations to improve their economic relationship. Bessent's extension comes after discussions with Chinese Vice Premier He Lifeng, and it maintains a truce that has prevented a resurgence of last year's tariff escalation.

But what is the Busan Agreement? This trade truce, named after its signing in Busan, South Korea in October 2025, was the result of months of escalating tariffs and retaliatory measures between the US and China. Beyond tariffs, the dispute also involved export controls, restrictions on rare earths, technology, shipping, and other strategic areas.

Under the Busan Agreement, the US agreed to reduce some tariffs on Chinese goods, while China committed to resuming purchases of US soybeans, pausing new rare-earth export restrictions, and addressing trade in fentanyl precursor chemicals. Both sides also agreed to suspend or delay several other measures that threatened to disrupt trade further.

The Busan Agreement's significance extends beyond Washington and Beijing. As the world's two largest economies, the US and China play a crucial role in global manufacturing and supply chains. A trade dispute between them can quickly impact shipping costs, factory input prices, technology supplies, and the cost of goods worldwide.

The extension of the Busan Agreement offers more time for negotiations, which could lead to a broader economic understanding between the two nations. US Trade Representative Jamieson Greer indicated that discussions on agriculture and non-tariff barriers are expected, while traders are watching for progress on a potential $30 billion mutual tariff reduction.