United States and China Reach Trade Agreement: Takeaways for Export and Supply Chain Controls

Following a bilateral meeting in Busan, South Korea, on October 30, 2025, between President Donald Trump and President Xi Jinping, the United States and China announced an agreement (the “Agreement”) intended to ease escalating economic and geopolitical tensions between the two countries. 

Although no formal joint text of the Agreement has been released, the early read-outs issued by the White House (the “White House Fact Sheet”) and by China’s Ministry of Commerce (“MOFCOM”) (the “MOFCOM Remarks”) are generally consistent. The Agreement represents a tentative pause in the recent escalation of tariffs, export, and supply chain restrictions. While the potential thaw is a welcome sign for industry actors with cross-border operations, implementation details remain unclear, and substantial export and supply chain controls remain in place in both countries. 

I. At a Glance: Summary and Key Points

• Bilateral Agreement Overview. The United States and China reached a preliminary trade agreement on October 30, 2025, temporarily easing tensions and halting some recent escalations in tariffs and export controls. No official joint text has been released, but the read-outs from both sides are generally consistent.
• Suspension of the U.S. “Affiliates Rule.” The United States agreed to suspend implementation of the new BIS “Affiliates Rule” for one year until November 9, 2026. This rule had expanded export control restrictions to entities owned 50% or more by listed parties.
• Suspension of Chinese Supply Chain Restrictions. China will “take appropriate measures” to resume semiconductor manufacturing and exports of legacy chips from certain facilities. China will suspend for one year its October 2025 export control measures on rare earth materials, but the status of its earlier April 2025 controls remains ambiguous.
• Tariff Reductions and Exemptions. The U.S. will halve the 20% fentanyl-related tariff to 10% and extend Section 301 tariff exclusions through November 2026. In exchange, China pledged to suspend retaliatory tariffs on U.S. agricultural and food exports, though details on product-level relief remain vague.

II. Key Agreement Terms

a. Export Controls and the “Affiliates Rule”

As discussed in our prior client alert, a month before the bilateral meeting in South Korea, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) had published an Interim Final Rule significantly expanding the scope of list‑based U.S. export controls (the “Affiliates Rule”). The Affiliates Rule extended license requirements associated with the Entity List, the Military End User (“MEU”) List, and certain sanctions programs under § 744.8 of the Export Administration Regulations (“EAR”) to entities directly or indirectly owned 50% or more, individually or in aggregate, by listed parties, in any foreign country.  

Pursuant to the Agreement, the United States suspended its implementation of the Affiliates Rule for one year, beginning November 10, 2025.  According to the BIS final rule formally establishing the suspension period, the Affiliates Rule will automatically go back into effect (absent further rulemaking) on November 10, 2026. The postponement affords U.S. and multi‑national companies additional time to design and implement a risk-based program to implement the requirements of the Affiliates Rule. Given the additional burdens and complexities that the rule will introduce for both traditional exporters and financial institutions, there is value in using that time to review and augment existing screening processes and resources so that they are fully in place and fit for purpose when the rule takes effect.

According to the White House Fact Sheet, China pledged to suspend retaliatory non-tariff countermeasures, including removal of certain U.S. companies from its Export Control List (“ECL”) and Unreliable Entity List (“UEL”). On November 5, 2025, MOFCOM released two clarifications detailing how these commitments will be implemented. First, with respect to the UEL, China announced that—effective November 10, 2025—it will suspend for one year the measures adopted under the April 4 UEL Notice (No. 7 [2025]) and terminate the measures imposed under the March 4 UEL Notices (Nos. 5 and 6 [2025]). Second, regarding export control designations, MOFCOM stated that China will remove 15 U.S. entities designated under its March 4 Notice (No. 13 [2025]) and suspend for one year the measures against 16 U.S. entities designated under its April 4 Notice (No. 21 [2025]) from the ECL, which prohibits exports of dual-use items to listed entities. In addition to these adjustments to the UEL and ECL, MOFCOM also issued Announcement No. 72 [2025] on November 9, confirming that China will suspend the implementation of Article 2 of MOFCOM Announcement No. 46 [2024] from November 9, 2025, until November 27, 2026. Article 2 had effectively barred approvals for exports of gallium-, germanium-, antimony-, and ultra-hard-materials-related dual-use items to U.S. destinations and imposed significantly heightened end-user and end-use review requirements on graphite-related dual-use exports to the United States.

b.Tariff Relief

The United States will halve the 20% fentanyl-related tariff. The overall U.S. tariff rate on Chinese imports will now average approximately 47%, down from roughly 57%. The United States will also extend the expiration of certain Section 301 tariff exclusions, currently due to expire on November 29, 2025, until November 10, 2026.

In exchange, the White House Fact Sheet states that China will suspend all retaliatory tariffs imposed on the United States since March 2025, including duties on major U.S. agricultural and food exports such as soybeans, pork, dairy products, and grains. However, China’s official announcements issued on November 5, 2025, describe a more calibrated, two-track adjustment rather than a blanket suspension. Under Notice No. 9 [2025], effective 13:01 on November 10, 2025, China will terminate the retaliatory tariffs on a defined set of U.S. agricultural and food products—such as chicken, wheat, corn, cotton, sorghum, soybeans, pork, beef, seafood, fruits, vegetables, and dairy. Separately, Notice No. 10 [2025] adjusts the broader set of retaliatory tariffs imposed in April 2025, which had applied a uniform 34% additional duty on all U.S.‑origin goods, without distinction among product categories. Beginning at 13:01 on November 10, 2025, China will continue to suspend the 24% portion of that surcharge for one year while retaining a 10% additional tariff on all U.S.-origin imports.

c. Supply Chain Restrictions

The White House Fact Sheet states that China will “take appropriate measures” to resume trade from certain semiconductor-manufacturing facilities in China, thereby enabling production and shipment of critical legacy chips to global markets. MOFCOM similarly confirmed exemptions for certain exports in a statement on November 1, 2025, but has not yet clarified how such exemptions will be evaluated or approved. On November 9, 2025, MOFCOM further indicated that it had taken steps to authorize exports that are demonstrably for compliant civil use.

d. Rare Earths

China has significantly tightened export controls over rare earth materials and technologies this year through two rounds of measures in April and October 2025 that collectively reshape the global regulatory landscape for critical minerals. On April 4, 2025, China released Announcement No. 18, imposing export licensing requirements on a set of medium and heavy rare earth elements in all forms, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. On October 9, 2025, China issued four coordinated measures via Announcements No. 56, 57, 61, and 62, which imposed new export controls across the rare earth sector. The new measures extend licensing requirements to (i) rare earth processing equipment and raw materials, (ii) medium and heavy rare-earth products such as holmium and related alloys, (iii) overseas products containing or made with Chinese rare earths or technology, and (iv) rare earth-related know-how and technical services. Together, these measures impose end‑use and end-user restrictions—particularly for military, semiconductor, and AI applications—and introduce an extraterritorial “deemed export” regime covering rare earth transfers abroad. The move threatened crucial global supply chains for semiconductors, military articles, and other advanced-tech products, as China reportedly produces over 90% of the world’s processed rare earths and rare earth magnets.

Both the MOFCOM Remarks and White House Fact Sheet indicate that China will suspend its implementation of the October 9 measures for one year. Although the White House Fact Sheet describes general licenses to be issued by China—i.e., “the de facto removal of controls”—covering the export of rare earths, gallium, germanium, antimony, and graphite for the benefit of U.S. end users and their suppliers, this language is absent from MOFCOM’s Remarks, which raises questions about whether China’s April 2025 controls on medium and heavy rare earth elements remain in effect.

 III. Next Steps and Outlook

The Agreement represents a limited but meaningful thaw in bilateral trade relations. However, implementation details are unclear, and substantial restrictions remain in place. The United States continues to apply strict controls on persons designated to the Entity List, MEU List, and SDN List, and in critical sectors such as semiconductors and emerging technologies, while China’s controls under the ECL, UEL, and Anti-Foreign Sanctions Law remains intact. 

Both governments appear to be testing a temporary stabilization period rather than considering a more permanent rollback of strategic controls. Although the one-year pause on the U.S. Affiliates Rule and China’s rare earth export measures may present an opportunity for renewed dialogue on technology trade, the underlying geostrategic competition between the United States and China over the future of AI continues to dominate the bilateral agenda. If past is prologue, any intentions to de-escalate could quickly unravel, and each side retains the legal infrastructure to re-impose restrictions quickly if tensions escalate.

On the U.S. side, President Trump has suggested that the United States will maintain restrictions on exports of the most advanced AI chips, potentially extending to non-U.S. companies, noting in a recent interview that for “the most advanced [chips],” the United States “will not let anybody have them other than the United States.” As discussed in a previous client alert concerning the “AI Action Plan,” these mixed signals echo the Trump administration’s competing objectives, which include (i) expanding the diffusion of advanced U.S. technology through relative easing of export controls, and (ii) denying “foreign adversaries” access to advanced AI compute and related resources through enhanced export controls enforcement, multilateral alignment, and extraterritorial controls (including the Foreign Direct Product Rule and “secondary tariffs”).

From the China side, rare earth exports may continue to be viewed as a strategically sensitive area under China’s long-term regulatory supervision. As noted above, the MOFCOM Remarks reference only the suspension of the October 2025 rare earth export control measures; the status of the broader April 2025 measures is unclear, and this distinction underscores China’s intent to preserve regulatory discretion over critical minerals. In parallel, China’s use of the UEL regime has expanded steadily since 2023, with more than 70 entities designated and the tool invoked more frequently in 2025. This trend suggests that China may continue to leverage the UEL as a policy instrument to manage perceived national security risks and to respond to foreign trade and technology restrictions.

Taking a step back, the very fact that certain issues were negotiated in this manner at the head‑of-state level is itself notable. In particular, the fact that the timeline for a published BIS rule—one not specific to China—would be revised bilaterally as part of trade discussions was widely seen as a change from past practice and reflects the transactional approach being pursued by both leaders in the foreign policy arena. It is also the latest reminder of the extent to which the current U.S. export control regime is at the forefront of U.S.-China bilateral relations.

Morrison Foerster will continue to monitor subsequent regulatory guidance and implementation measures, including any refinements to BIS licensing procedures, China’s export control enforcement, and related supply chain implications.