LONDON, June 10 – The United States and China have taken a significant step toward easing escalating trade tensions, announcing a framework agreement aimed at reducing export restrictions and keeping their fragile tariff truce alive. The breakthrough came after two days of intensive negotiations in London, where both nations worked to revive a previous consensus reached in Geneva that had recently faltered.
U.S. Commerce Secretary Howard Lutnick stated that the newly formed agreement adds “substance” to the Geneva consensus, which had suffered setbacks due to continued Chinese export restrictions on critical minerals. These restrictions had provoked retaliatory measures from the U.S, including curbs on semiconductor design software and aviation-related equipment. The recent London talks appear to have rekindled cooperation, setting the stage for further progress.
According to Lutnick, the new framework includes provisions to lift China’s restrictions on rare earth minerals and magnets, while also leading the U.S. to scale back certain export restrictions. While specifics were not immediately disclosed, both countries now intend to present the framework to their respective presidents for review and potential implementation.
China’s Vice Commerce Minister, Li Chenggang, acknowledged that both sides had come to a preliminary trade understanding. He emphasized that both governments will now consider the framework at the highest levels to determine its final structure and timing of execution.
Tariffs Remain a Looming Threat
Despite this progress, many of the underlying issues between the two economic powerhouses remain unresolved. U.S. President Donald Trump’s shifting trade policies have contributed to economic uncertainty, disrupting global markets and straining supply chains. Over the past months, businesses on both sides have absorbed the impact of soaring tariffs, with costs spilling over to consumers and exporters alike.
The World Bank has taken note of the wider implications, lowering its global growth forecast for 2025 due to increased protectionism and ongoing trade friction. Experts warn that without a comprehensive agreement before the looming August 10 deadline, tariffs could rise dramatically—potentially escalating from 30% to 145% for U.S. imports and from 10% to 125% for Chinese goods.
Trade analysts suggest that the Geneva agreement had left too much room for interpretation, leading to confusion about enforcement and expectations. Josh Lipsky, senior director at a Washington-based economic think tank, noted that while the two countries are not starting over entirely, they are essentially rebooting negotiations with more clarity this time.
Markets React Cautiously
Financial markets showed mild optimism in response to the latest developments. Asian share prices edged higher, as benchmarks like the MSCI Asia-Pacific index—excluding Japan—ticked up slightly above 0.5 percent. However, traders and investors appeared wary, awaiting concrete details before placing full confidence in the outcome.
Market strategist Chris Weston remarked that the muted response reflects the expectation that a framework deal would eventually emerge. He highlighted that real momentum depends on specific commitments, especially regarding the volume of rare earths that will be permitted to flow to the U.S, and the extent to which U.S. semiconductor exports can resume.
Some rare earth firms in China have reportedly received export licenses in the wake of the London discussions, hinting at early signs of regulatory loosening. These licenses were granted to several companies listed in Shenzhen, indicating that the Chinese government may already be preparing to comply with parts of the framework.
Rare earth minerals are essential to the production of electric vehicle motors and other high-tech components, giving China substantial leverage as it controls a dominant share of the global supply. Beijing’s decision earlier this year to halt exports had shocked manufacturers around the world and triggered swift retaliation from Washington.
In May, the U.S. answered with new restrictions targeting key technologies and sectors, including revoking previously issued export licenses for semiconductor materials and aviation products.
Outlook Still Uncertain
Looking ahead, resolving the trade standoff may require deeper policy shifts, not just temporary fixes. During a rare visit to Beijing, European Central Bank President Christine Lagarde emphasized the need for international cooperation to address economic imbalances that trade wars only worsen.
Recent customs data shows a stark decline in Chinese exports to the United States, plunging 34.5% in May—the sharpest year-on-year drop since the height of the COVID-19 crisis. Though the impact on U.S. inflation and employment has been limited so far, ongoing uncertainty continues to dampen business sentiment.
Ordinary citizens and professionals are watching closely. A young legal professional based in Beijing described the talks as a “positive signal” even though full terms haven’t been announced. “Fighting a trade war in today’s interconnected world just hurts both sides. I want to see progress that helps everyone,” he said.
Meanwhile, industry groups across multiple countries, including Mexico, Japan, and Canada, have appealed to the U.S. administration to avoid imposing fresh tariffs on aviation and aerospace products. These calls underscore the global concern surrounding the Trump administration’s national security-based trade approach.
In a further twist, a U.S. appeals court has allowed Trump’s suspended tariffs to remain in place while reviewing a lower court’s ruling that questioned their legality. These “reciprocal” duties, currently on hold, remain a crucial bargaining chip and continue to exert pressure on Beijing.