ISLAMABAD (PEN) : The United States and China have agreed to a tentative trade framework aimed at defusing escalating tensions between the world’s two largest economies. The accord, reached after two days of high-level negotiations in London, marks a cautious step toward trade normalization, although major issues remain unresolved.
Rare Earth Exports at the Core of Deal
One of the central features of the provisional agreement is China’s pledge to lift its recent restrictions on the export of rare earth minerals and magnets — critical components for electric vehicles, green energy systems, and defense technologies. In return, the U.S. signaled a willingness to ease some of its own export curbs on key technologies, including semiconductor software and aviation components, although no specific rollback timeline has been disclosed.
“These restrictions were imposed when China halted rare earth shipments, and as President Trump has said, this needs to be resolved in a balanced way,” said U.S. Commerce Secretary Howard Lutnick, speaking to reporters after the talks.
Framework Reflects Presidential Mandate
The framework stems from a phone conversation on June 5 between President Donald Trump and President Xi Jinping. Chinese Vice Commerce Minister Li Chenggang confirmed that both countries reached consensus “in principle” to implement the Geneva understandings established last month.
“We have reached a framework to implement the Geneva consensus and the call between the two presidents,” Lutnick said. “Now, both sides will take this framework back to their respective leaders for final approval.”
Tariff Pressures Remain
Despite the breakthrough, both parties acknowledged that the deal does not resolve broader trade grievances. The U.S. continues to raise concerns over China’s state-supported industrial model and lack of reciprocal market access.
A hard deadline of August 10 has been set for reaching a final agreement. If negotiations fail, the suspended tariff increases will be reinstated—raising U.S. tariffs on Chinese goods from 30% to 145%, and Chinese tariffs on American goods from 10% to 125%.
Josh Lipsky of the Atlantic Council’s GeoEconomics Center commented, “They are back to square one, but that’s much better than square zero.”
Market and Legal Reactions
Financial markets responded cautiously to the news. The MSCI Asia-Pacific index outside Japan edged up 0.2%, suggesting the market had already priced in expectations of progress. Analysts noted that clarity and implementation details will be essential for sustained investor confidence.
Meanwhile, legal uncertainty looms in the background. A U.S. federal appeals court has allowed President Trump’s expansive “reciprocal” tariff policy to remain in effect pending further review, potentially complicating the path to a lasting agreement.
Economic Context and Outlook
Recent data highlights the economic costs of the ongoing standoff. China’s exports to the U.S. plunged 34.5% in May—the sharpest monthly drop since the early days of the COVID-19 pandemic. While U.S. inflation and employment remain relatively stable, business sentiment has weakened.
The World Bank on Tuesday revised its 2025 global growth forecast downward to 2.3%, citing persistent trade tensions as a major global headwind.
Looking Ahead
Although the London talks mark progress, officials on both sides agree that significant work remains. U.S. Treasury Secretary Scott Bessent left the negotiations early to testify before Congress, while Trade Representative Jamieson Greer stayed through the final session.
For now, the tentative deal helps preserve the fragile truce established in Geneva. Whether it evolves into a comprehensive trade settlement depends on decisions expected in the coming weeks by both Washington and Beijing.
