Key Points
- U.S. and China reached a trade framework to ease tariffs and lift export restrictions on rare earths.
- The deal still needs approval from Presidents Trump and Xi before implementation.
- Rare earth mineral exports from China and U.S. tech goods bans are key parts of the agreement.
- Tariff rates could rise sharply on August 10 if a full agreement isn’t finalized.
U.S. and Chinese officials have agreed on a new trade framework aimed at reviving the truce established last month in Geneva and easing mutual export restrictions. The two-day negotiations in London concluded with U.S. Commerce Secretary Howard Lutnick and China’s Vice Minister of Commerce Li Chenggang announcing a tentative deal that could help defuse ongoing tariff escalations.
The agreement addresses China’s export curbs on rare earth minerals, which are essential for electric vehicles and other technologies. In return, the U.S. has agreed to lift some of its recent export controls, including those on semiconductor design software and aviation components. However, Lutnick noted that the framework must be approved by both Presidents Donald Trump and Xi Jinping before being implemented.
The Geneva accord had previously stalled due to China’s continued restrictions on critical mineral exports, prompting the U.S. to retaliate with export bans. The new framework outlines steps to resolve these tensions. It could prevent a steep increase in tariff rates scheduled for August 10, which would otherwise return to triple-digit levels.
Despite this progress, experts caution that core trade disagreements remain unresolved, especially those concerning the U.S.’s longstanding complaints about China’s state-controlled economic practices and unilateral tariffs. Analyst Josh Lipsky of the Atlantic Council remarked, “They are back to square one, but that’s much better than square zero.”
Investors responded cautiously, with MSCI’s Asia-Pacific index rising slightly. Analysts emphasized that details about the quantity and type of rare earth exports, as well as the freedom of U.S.-produced chips, will be critical in determining market reactions.
The World Bank also weighed in, cutting its 2025 global growth forecast to 2.3% due to heightened tariff risks and uncertainty. Meanwhile, U.S. business confidence remains fragile, and the impact of tariffs on inflation and jobs is being closely watched.
A recent phone call between Trump and Xi helped reset the tone of the talks. It contributed to the finalization of the agreement. Both nations now face pressure to finalize a comprehensive deal before the August deadline.
