U.S. and Chinese officials said on Tuesday they had agreed on a framework to put 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 differences.
At the end of two days of intense negotiations in London, U.S. 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, chemicals and other technology goods to China.
Lutnick said the agreement reached in London would remove some of the recent U.S. export restrictions, 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. “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.”
In a separate briefing, China’s Vice Commerce Minister Li Chenggang also said a trade framework had been reached that would be taken back to U.S. and Chinese leaders.
“The two sides have, in principle, reached a framework for implementing the consensus reached by the two heads of state during the phone call on June 5th and the consensus reached at the Geneva meeting,” Li told reporters.
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 U.S. 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 U.S. side and from 10% to 125% 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 0.2%.
“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 U.S., and the subsequent freedom for U.S.-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 U.S. 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, sort of as President Trump said, in a balanced way.”
U.S. 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.
But markets have made up much of the losses they endured after Trump unveiled his sweeping “Liberation Day” tariffs in April, aided by the reset in Geneva between the world’s two biggest economies.
PHONE CALL HELPED
The second round of U.S.-China talks was given a major boost by a rare phone call between Trump and Chinese President Xi Jinping last week, which Lutnick said provided directives that were merged with Geneva truce agreement.
Customs data published on Monday showed that China’s exports to the U.S. plunged 34.5% in May, the sharpest drop since the outbreak of the COVID pandemic.
While the impact on U.S. inflation and its jobs market has so far been muted, tariffs have hammered U.S. business and household confidence and the dollar remains under pressure.
Lutnick was joined by U.S. 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 U.S. responded by halting shipments of semiconductor design software and chemicals and aviation equipment, revoking export licences that had been previously issued.
Just after the framework deal was announced, a U.S. 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.
© Thomson Reuters 2025.
U.S., China reach deal to ease export curbs, keep tariff truce alive
