United States and Chinese officials said on Tuesday they had agreed on a framework to put their trade truce back on track and remove Beijing’s export restrictions on rare earths while offering little sign of a durable resolution to longstanding trade differences.
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 some of the recent US export restrictions, but did not provide details after the talks concluded around midnight London time (4am PKT).
“We have reached a framework to implement the Geneva consensus and the call between the two presidents,” Lutnick said.
“The idea is we’re going to go back and speak to President Trump and make sure he approves it. They’re going to go back and speak to President Xi and make sure he approves it, and if that is approved, we will then implement the framework.”
Trump touted that an agreement was reached, saying China would supply “magnets, and any necessary rare earths” to the world’s biggest economy.
The issue of rare earth exports was a key sticking point in negotiations and Trump added that Washington, in turn, would allow Chinese students to remain at US colleges after the deal, which is subject to his and Xi’s final approval.
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.
The dispute 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 Centre 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 30per cent to 145pc on the US side and from 10pc to 125pc on the Chinese side.
Investors, who have been badly burned by trade turmoil before, offered a cautious response and MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.57pc.
“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.”
Resolving restrictions
Lutnick said China’s restrictions on exports of rare earth minerals and magnets to the US will be resolved as a “fundamental” part of the framework agreement.
“Also, there were a number of measures the United States of America put on when those rare earths were not coming,” Lutnick said.
“You should expect those to come off … in a balanced way.”
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 2.3pc, saying higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.
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.
Phone call helped
The second round of US-China talks was given a major boost by a rare phone call between Trump and Xi last week, which Lutnick said provided directives that were merged with the Geneva truce agreement.
Customs data published on Monday showed that China’s exports to the US plunged 34.5pc 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.
Lutnick was joined by US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent at the London talks. Bessent departed hours before their conclusion to return to Washington to testify before Congress on Wednesday.
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, 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 the 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 34pc “reciprocal” duties that had prompted swift tariff escalation.
