Smoothing Over Trade Strife: USA and China Ink Basic Trade Pact
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US and China settle key points in trade dispute - US and China reach a preliminary understanding in their trade dispute
The nitty-gritty of the agreement wasn't immediately spilled by Bigwigs from Beijing and D.C. Howard Lutnick, the optimistic chap, voiced hopes that issues concerning rare earths "should get resolved as this general framework gets implemented." China reigns supreme in the trade of these materials indispensable for numerous technologies and introduced export controls during the trade row with Donald Trump, the former US President.
On the flip side, China anticipates the USA to dismantle export controls on high-tech computer chips and other tech goodies. The primary objective of the chinwags in London town was to lock down the mutual tariff reductions agreed upon tentatively in Geneva last month.
Since Trump took office in early 2020, the trade clash between the two biggest economic titans in the world has escalated. China retaliated against Trump's scathing trade policies towards the US' trading buddies with its own tariffs, pushing Trump to escalate tariffs further. Ultimately, tariffs of 145% were imposed on Chinese exports to the USA, while tariffs of 125% were due in the opposite direction.
In mid-May, the two countries agreed in Geneva to markedly reduce tariffs for 90 days to speed up negotiations. "We're giving it our best shot," said US Trade Rep Jamieson Greer, who was also part of the London tete-a-tetes. "We're looking forward to collaborating with the Chinese."
China's Trade Rep Li lauded the "professional, rational, thorough, and open" tête-à-tête with US reps. He expressed anticipation that the headway made in London would beef up trust on both sides.
Trump had previously expressed skepticism about the likelihood of a fruitful negotiation, accusing the Beijing leadership of failing to adhere to the first agreement reached in Geneva. Last week, he had his first chat with Chinese President Xi Jinping since taking office, after which he adopted a more amiable stance.
The semblance of an agreement being reached once more in London has brought a breather to the markets, particularly to the stock exchanges in Hong Kong and Shanghai. However, analysts noted that there's no inkling of the agreed-upon points yet. So far, Washington and Beijing have only reconfirmed their agreement from May in Geneva.
If there's no visible progress soon, such as ships carting rare earths or a genuine lifting of tariffs, the situation could flare up, warned Stephen Innes of SPI Asset Management. Until then, rising stock prices are mainly anchored on sunny sentiments.
The impacts of the trade war are already evident: According to official stats from Beijing, Chinese exports to the USA plummeted by 12.7% in May compared to April. While the Chinese government endeavors to mend bridges with Washington, it has initiated talks with other partners to form a united front against the USA.
- China
- USA
- Basic Trade Pact
- London
- Trade Clash
- Geneva
- Howard Lutnick
- Donald Trump
- Trade Skirmish
- Trade War
- Peking
Additional Insights:
- Rare Earths: There was a significant drop in China's exports of critical rare earth elements to the USA, with a decrease of approximately half compared to the previous year. This occurred after the initial trade talks in Geneva in May 2025[2].
- Trade Agreements Overview:
- Geneva Agreement (May 2025): The U.S. and China agreed to reduce tariffs drastically. The U.S. tariffs on Chinese imports were cut from around 145% to 30%, while China's tariffs on U.S. goods were slashed from 125% to 10%[2][3].
- London Framework Deal (June 2025): A new framework was agreed upon to ease tensions, but details are scant. The deal requires final approval from both leaders, Trump and Xi Jinping[1][2].
- High-Tech Computer Chips: No specific details about conditions for high-tech computer chips have emerged in the recent trade agreements or discussions between the U.S. and China.
- The agreement reached in London includes discussions about China's export controls on rare earths, essential for various technologies, which are anticipated to be resolved as the general framework is implemented.
- As part of the trade negotiations, China aims for the USA to lift export controls on high-tech computer chips and other tech goods, while the USA looks forward to mutual tariff reductions, as agreed upon in Geneva.
