How China and the US are racing to de-escalate the trade war

President Trump is trying to publicly de-escalate tensions with China to soothe markets while privately keeping up pressure on Beijing—a difficult balancing act that is being closely watched by Wall Street.

After threatening additional 100% tariffs on Chinese imports starting Nov. 1, Trump in recent days spoke with senior officials, including Treasury Secretary Scott Bessent, about sending a message to the world that the U.S. wants to de-escalate trade tensions with China, according to people familiar with the matter.

Trump’s 100% tariff threat Friday came after Beijing moved to impose restrictions on the export of rare-earth minerals. The renewed conflict sparked a large U.S. market selloff, during which the president suggested he might not meet with Chinese leader Xi Jinping.

Trump’s desire to de-escalate comes as both nations privately expressed desire to quell tensions, at least for now, in their current trade dispute—the latest in a cycle of flare-up and de-escalation that has been in place since the beginning of Trump’s second term. In this case, the Chinese are eager to save a summit between Trump and Xi expected later this month, while Trump’s team wants to stem losses in the stock market and avoid a public diversion from his Middle East peace deal, which they have groused about being overshadowed by the latest trade flare-up.

Administration officials had been talking for weeks about using a variety of tools to fight back against China if needed, according to people familiar with the discussions. Officials have previously discussed using various measures to protect U.S. infrastructure from Chinese incursion and further limit the ability of Chinese companies to invest in the U.S.

Officials had been considering the possible use of sanctions and export controls as a way to try to block China’s access to U.S. markets. Ideas floated inside the administration have included possibly targeting Chinese stocks on the U.S. stock exchanges by strengthening the audit review process required for those companies. They have also considered executive action to reinforce U.S. infrastructure against Chinese incursions, sanction Chinese firms for being in business for Russia’s oil or further limit the ability of Chinese companies to invest in the U.S.

In the end, Trump, Bessent and other senior advisers agreed last week to give priority to stabilizing global markets, while trying to avoid an immediate escalation with China. The president softened his position on meeting with Xi after initially suggesting the summit was off, and wrote with a more positive tone on Truth Social over the weekend. A Sunday social-media post read in part: “Don’t worry about China! It will all be fine," and added that the Trump administration wants to help China.

The White House and Treasury Department didn’t respond to requests for comment.

A person close to Bessent said his latest engagement with Chinese officials, which came after Trump’s 100% tariff threat, included the Treasury secretary making clear that Trump is open to de-escalatory talks but also not ruling out the use of countermeasures if China doesn’t back down.

“I imagine I will have some contact with my counterpart and then the two leaders will meet," he said Monday on Fox Business Network. “The relationship, despite this announcement last week, is good."

China’s Ministry of Commerce issued a response Sunday that notably lacked any specific threats of retaliation against the new tariff threat from the U.S. Instead, the ministry promised to implement the new export controls in a “prudential and moderate manner"—a tacit admission that Beijing has overplayed its hand.

“China’s export controls are not export bans," the ministry said, while adding the new rule was intended to target military end-uses, not the broader civilian applications that have rattled global markets. “All applications for compliant export for civil use can get approval, so that relevant businesses have no need to worry," it said.

Further evidence of Beijing’s desire to lower the temperature can be seen in its domestic media, where Trump’s recent threat of 100% tariffs on Chinese goods has received minimal coverage. By avoiding inflammatory rhetoric, China is building itself an off-ramp to move the policy away from a blanket ban without losing face.

While Beijing has signaled a softer stance on its disruptive rare-earth export controls in recent days, it has offered no indication of a full reversal. The refusal to rescind the policy injects uncertainty into the coming trade talks, leaving the door open for a new cycle of retaliation and counter-retaliation.

Beijing has threatened retaliation if Trump sticks to his 100% tariff threat. “If the U.S. insists on its own way, China will resolutely take corresponding measures to safeguard its legitimate rights and interests," foreign ministry spokesman Lin Jian said at a regular news briefing on Monday.

Despite Beijing’s conciliatory signals, however, people close to the Trump administration say the U.S. side likely will demand that China rescind, not merely delay or water down the rare-earth export rule.

U.S. firms that do business in China are hopeful that both sides will avoid another round of triple-digit tariffs.

“The U.S. and China can choose to spur another cycle of action and retaliation, or they can choose a path that leads to de-escalation and negotiation," said Sean Stein, president of the U.S.-China Business Council. “For the good of the economy, U.S. companies are hoping for the latter."

Write to Brian Schwartz at brian.schwartz@wsj.com, Lingling Wei at Lingling.Wei@wsj.com and Gavin Bade at gavin.bade@wsj.com