In a significant development for global trade, top officials from the United States and China have reached an agreement in principle regarding a framework aimed at reducing trade tensions between the two leading economies. The negotiations took place over two days in London, where both parties engaged in discussions about critical trade issues, including the export of rare earth minerals.
Framework focuses on rare earth minerals
US Commerce Secretary Howard Lutnick announced that the proposed agreement is expected to address the existing restrictions on rare earth minerals and magnets, which play an essential role in the production of modern technology. Following the conclusion of the talks, Lutnick stated, “We have reached a framework to implement the Geneva consensus. Once the presidents approve it, we will then seek to implement it.” This plan will now be forwarded to US President Donald Trump and Chinese President Xi Jinping for their approval.
The discussions highlighted the ongoing challenges in US-China trade relations, particularly concerning the high-stakes market for rare earth minerals, critical for industries ranging from smartphones to electric vehicles. Recently, both nations had agreed to a temporary truce over trade tariffs; however, accusations of violations have marred the progress made since that agreement.
Recent trade tensions and negotiations
In previous months, the US accused China of delaying the export of essential rare earth metals and magnets, while China responded by restricting access to American goods, including semiconductors and technologies related to artificial intelligence (AI). Notably, after a phone call between Trump and Xi last week, which the US President described as “a very good talk,” both sides reported a shared understanding of the need for a trade resolution.
“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,” asserted China’s Vice Commerce Minister Li Chenggang.
The series of talks comes on the heels of Trump’s earlier announcement of sweeping tariffs on imports from various countries, with China being the most affected. This led to reciprocal tariff increases, causing rates to surge as high as 145%. A temporary truce was established in May, which saw a reduction in tariffs from 30% to 10% on certain goods, with a 90-day deadline to finalize a trade deal.
However, subsequent claims of non-compliance have emerged, with US Trade Representative Jamieson Greer indicating that China had not adequately rolled back restrictions on rare earth magnets. Conversely, Beijing cited violations by the US, including restrictions on sales of software for computer chip design to Chinese firms and canceling visas for Chinese students.
In the lead-up to the recent negotiations, the Chinese Ministry of Commerce revealed that it had approved some applications for rare earth export licenses, although specific details were not disclosed. On Friday, Trump mentioned that Xi had agreed to resume trade in rare earth materials, marking a potential turning point in the ongoing trade saga.