U.S. President Donald Trump remains on track to meet Chinese leader Xi Jinping in South Korea in late October, U.S. Treasury Secretary Scott Bessent said, as both sides looked to ease tensions following fresh tariff threats and export controls.

A return to an all-out trade war between the world's two largest economies appeared imminent late last week, after China announced on Thursday a major expansion of its rare earths export controls. Trump responded on Friday by threatening to raise tariffs on Chinese goods to triple-digits, sending markets and U.S.-China relations into a tailspin.

But after the weekend, Bessent and China's Commerce Ministry sought to reassure traders and investors on both sides of the Pacific, highlighting the cooperation between their negotiating teams and the possibility they could find a way forward from the current tariff truce.

The language in statements from both sides remains tough, however.

"We have substantially de-escalated," Bessent said in an interview with Fox Business Network on Monday.

Substantial communications between the two sides had taken place over the weekend and there would be U.S.-China staff-level meetings this week in Washington on the sidelines of the World Bank and International Monetary Fund annual gatherings, he added.

"The 100% tariff does not have to happen," Bessent said. "The relationship, despite this announcement last week, is good. Lines of communication have reopened, so we'll see where it goes."

"President Trump said that the tariffs would not go into effect until November 1. He will be meeting with Party Chair Xi in Korea. I believe that meeting will still be on."

Trump and Xi had planned to meet during the summit of the Asia-Pacific Economic Cooperation forum hosted by South Korea in late October.

In a statement on Tuesday, China's Commerce Ministry confirmed that a working-level meeting had taken place the previous day, while highlighting earlier formal negotiations held in London, Stockholm and Madrid, culminating in a 90-day tariff extension.

But the statement from a Commerce Ministry spokesperson warned "the U.S. cannot ask for talks while simultaneously threatening new restrictive measures."

Over the weekend, officials from both sides looked to shift the blame for risking a renewed trade war onto each other.

U.S. Trade Representative Jamieson Greer said on Sunday that China had deferred Washington's request for a phone call following Beijing's rare earths announcement, calling the move a "power grab."

That same day, China's Commerce Ministry criticised the addition of Chinese companies to a U.S. trade blacklist and the imposition of port fees on China-linked ships.

Wall Street's main indexes closed up as much as 2.2% on Monday, buoyed by Bessent's signal that trade talks between the two superpowers remain on track, while Asian markets had a positive morning.

That optimism faded after China at noon local time announced sanctions on five U.S.-linked subsidiaries of South Korean shipbuilder Hanwha Ocean , sending stocks tumbling amid fears the trade war could widen.

Source: Investing.com