US and China agreed to a limited trade framework

United States and China officials have agreed to a barebones trade framework meant to calm tensions and delay massive tariff hikes, following two days of closed-door talks that ended late Tuesday in London, according to Reuters.

The deal will remove some restrictions on China’s rare earth exports and unwind a few recent U.S. export bans, but offers no actual resolution to the larger fight that’s been dragging both economies through hell.

The meeting, which wrapped around midnight, was the first real movement since the failed Geneva agreement last month. That earlier deal got trashed after China refused to lift bans on critical minerals.

In response, the Trump administration retaliated with new export controls, halting U.S. shipments of chip software, airplane equipment, and advanced chemicals.

Rare earths back in play as export licenses resume

U.S. Commerce Secretary Howard Lutnick told reporters that the new agreement puts “meat on the bones” of the Geneva talks. He said the framework clears a path for removing export restrictions “in a balanced way,” including on China’s rare earth magnets and minerals, but didn’t spell out what the U.S. will drop in return.

“We have reached a framework to implement the Geneva consensus and the call between the two presidents,” Howard said. “And if that is approved, we will then implement the framework.”

China’s Vice Commerce Minister Li Chenggang confirmed the same deal had been reached “in principle,” and said it would now go back to the leaders of both countries for review. So far, there’s no written agreement—just mutual paperwork to present to President Donald Trump and President Xi Jinping.

Signs of a policy shift started to show almost immediately. Several Shenzhen-listed companies, including JL MAG Rare-Earth, Innuovo Technology, and Beijing Zhong Ke San Huan, announced they had received fresh export licenses from Chinese authorities.

Tariff hikes paused, but nothing is actually solved

This deal doesn’t erase the deeper problem. The U.S. still sees China’s economic model as state-controlled and unfair. Trump’s team has never backed off its claim that Beijing manipulates trade using subsidies and closed-door rules.

On the other hand, China continues to argue that Washington’s use of unilateral tariffs is illegal and reckless. No one gave up ground on that front. The so-called “framework” is just a stopgap to avoid more damage while they stall for time.

That stall is short. August 10 is now the deadline for a bigger agreement. If nothing happens, tariff rates will explode again. The U.S. will jump from about 30% to 145%, and China will spike from 10% to 125%. It’s the same game of chicken all over again.

The impact is already visible. China’s exports to the U.S. fell by 34.5% in May, the sharpest drop since COVID lockdowns. The numbers came straight from Chinese customs on Monday. Meanwhile, U.S. inflation hasn’t surged yet, but business confidence is falling and the dollar is getting weaker.

Even the World Bank is waving a red flag. On Tuesday, it lowered its global growth outlook for 2025 by 0.4 percentage points, now expecting just 2.3%. It warned that higher tariffs and constant trade tension are dragging down nearly every major economy.

Christine Lagarde, head of the European Central Bank, visited Beijing this week and said the current trade war could wreck more than just bilateral relations. “A resolution to the trade war may require policy adjustments from all countries to treat financial imbalances or otherwise greatly risk mutual economic damage,” she said.

Other countries and industries are trying to put pressure on Trump to avoid another trade spike. The governments of Mexico, Japan, Canada, the European Union, and a long list of airlines and aerospace companies submitted formal complaints to the administration asking them not to add national security tariffs on commercial aircraft parts. No response yet from the White House.

Still, Trump has no intention of backing off for now. Right after the framework deal was announced, a U.S. appeals court gave him the green light to keep one of his most aggressive tariffs—the 34% “reciprocal” duty—active while a lower court ruling that tried to kill it gets reviewed. That decision lets Trump hang on to one of his key trade weapons against China, even though it’s currently suspended.

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