US and Chinese officials said on Tuesday they had agreed on a framework to get their trade truce back on track and remove China’s export restrictions on rare earths while offering little sign of a durable resolution to longstanding trade tensions.
At the end of two days of intense negotiations in London, US Commerce Secretary Howard Lutnick told reporters the framework deal puts “meat on the bones” of an agreement reached last month in Geneva to ease bilateral retaliatory tariffs that had reached crushing triple-digit levels.
But the Geneva deal had faltered over China’s continued curbs on critical minerals exports, prompting the Trump administration to respond with export controls of its own preventing shipments of semiconductor design software, aircraft and other goods to China.
Lutnick said the agreement reached in London would remove restrictions on Chinese exports of rare earth minerals and magnets and some of the recent US export restrictions “in a balanced way”, but did not provide details after the talks concluded around midnight London time.
“We have reached a framework to implement the Geneva consensus and the call between the two presidents,” Lutnick said, adding that both sides will now return to present the framework to their respective presidents for approvals.
“And if that is approved, we will then implement the framework,” he said.
In a separate briefing, China’s Vice Commerce Minister Li Chenggang also said a trade framework had been reached in principle that would be taken back to US and Chinese leaders.
US President Donald Trump’s shifting tariff policies have roiled global markets, sparked congestion and confusion in major ports, and cost companies tens of billions of dollars in lost sales and higher costs.
The World Bank on Tuesday slashed its global growth forecast for 2025 by four-tenths of a percentage point to 2.3%, saying higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.
The deal may keep the Geneva agreement from unravelling over duelling export controls, but does little to resolve deep differences over Trump’s unilateral tariffs and longstanding US complaints about China’s state-led, export-driven economic model.
The two sides left Geneva with fundamentally different views of the terms of that agreement and needed to be more specific on required actions, said Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center in Washington.
“They are back to square one but that’s much better than square zero,” Lipsky added.
The two sides have until August 10 to negotiate a more comprehensive agreement to ease trade tensions, or tariff rates will snap back from about 30% to 145% on the US side and from 10% to 125% on the Chinese side.
MARKETS CAUTIOUS
Global stocks have recovered their hefty losses after Trump’s April “Liberation Day” tariff announcement and are now near record highs. Investors burned by earlier turmoil offered a cautious response to the deal and MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.57%.
“The devil will be in the details, but the lack of reaction suggests this outcome was fully expected,” said Chris Weston, head of research at Pepperstone in Melbourne.
“The details matter, especially around the degree of rare earths bound for the US, and the subsequent freedom for US-produced chips to head east, but for now as long as the headlines of talks between the two parties remain constructive, risk assets should remain supported.”
Signs of the curbs loosening surfaced in China, as several Shenzhen-listed rare earth magnet firms, including Innuovo Technology and Beijing Zhong Ke San Huan said they have obtained export licenses from Chinese authorities.
China holds a near-monopoly on rare earth magnets, a crucial component in electric vehicle motors, and its decision in April to suspend exports of a wide range of critical minerals and magnets upended global supply chains.
In May, the US responded by halting shipments of semiconductor design software and chemicals and aviation equipment, revoking export licences that had been previously issued.
CHINA EXPORTS PLUNGED
A resolution to the trade war may require policy adjustments from all countries to treat financial imbalances or otherwise greatly risk mutual economic damage, European Central Bank President Christine Lagarde said on a rare visit to Beijing on Wednesday.
Customs data published on Monday showed that China’s overall exports to the US plunged 34.5% in May, the sharpest drop since the outbreak of the COVID pandemic.
While the impact on US inflation and its jobs market has so far been muted, tariffs have hammered US business and household confidence and the dollar remains under pressure.
Beijing-based lawyer Peter Wu, 28, saw the talks as “a good signal” even if details were not fully negotiated.
“I feel that fighting a trade war in the context of global integration is a lose-lose situation for both sides. I naturally hope that my motherland will be better,” he said.
China, Mexico, the European Union, Japan, Canada and many airlines and aerospace companies worldwide urged the Trump administration not to impose new national security tariffs on imported commercial planes and parts, according to documents released Tuesday.
Just after the framework deal was announced, a US appeals court allowed Trump’s most sweeping tariffs to stay in effect while it reviews a lower court decision blocking them on grounds that they exceeded Trump’s legal authority by imposing them.
The decision keeps alive a key pressure point on China, Trump’s currently suspended 34% “reciprocal” duties that had prompted swift tariff escalation.
