LONDON: Top US and Chinese officials were meeting in London on Monday to try to defuse a high-stakes trade dispute that has widened beyond tit-for-tat tariffs to restrictions over rare earths, threatening to cripple supply chains and slow global growth.
Officials from the two superpowers were meeting at the ornate Lancaster House to try to get back on track with a preliminary agreement struck last month in Geneva that had briefly lowered the temperature between Washington and Beijing. Since then the US has accused China of slow-walking on its commitments, particularly around rare earths shipments. US economic adviser Kevin Hassett said on Monday that the US team wanted a handshake from China on rare earths after Presidents Donald Trump and Xi Jinping spoke last week.
“The purpose of the meeting today is to make sure that they’re serious, but to literally get handshakes,” Hassett, director of the National Economic Council, told CNBC in an interview. He said the expectation was that immediately after the handshake, export controls would be eased and rare earths released in volume.
The talks, which could run into Tuesday, come at a crucial time for both economies, with investors looking for relief from Trump’s cascade of tariff orders since his return to the White House in January.
China’s export growth slowed to a three-month low in May while its factory-gate deflation deepened to its worst level in two years.
In the US, the trade war has put a huge dent in business and household confidence, and first-quarter gross domestic product contracted due to a record surge in imports as Americans front loaded purchases to beat anticipated price increases.
But for now, the impact on inflation has been muted, and the jobs market has remained fairly resilient, though economists expect cracks to become more apparent over the summer.
Attending the talks in London will be US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer, and a Chinese contingent helmed by Vice Premier He Lifeng.
The inclusion of Lutnick, whose agency oversees export controls for the US, is one indication of how central rare earths have become. China holds a near-monopoly on rare earth magnets, a crucial component in electric vehicle motors.
Lutnick did not attend the Geneva talks at which the countries struck a 90-day deal to roll back some of the triple-digit tariffs they had placed on each other.
The second round of meetings comes four days after Trump and Xi spoke by phone, their first direct interaction since Trump’s January 20 inauguration. During the more than one-hour-long call, Xi told Trump to back down from trade measures that roiled the global economy and warned him against threatening steps on Taiwan, according to a Chinese government summary.
But Trump said on social media the talks focused primarily on trade led to “a very positive conclusion,” setting the stage for Monday’s meeting in London. The next day, Trump said Xi had agreed to resume shipments to the US of rare earths minerals and magnets and Reuters reported on Friday that China has granted temporary export licenses to rare-earth suppliers of the top three US automakers. China’s decision in April to suspend exports of a wide range of critical minerals and magnets upended the supply chains central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world.
