US, China Reach Deal To Ease Export Curbs, Keep Tariff Truce Alive

In a significant move aimed at stabilizing global markets and easing mounting economic pressure, the United States and China have reached a preliminary trade agreement to resolve export restrictions and maintain a fragile tariff truce. The framework deal, announced after two days of intense negotiations in London, signals a renewed effort by the world's two largest economies to prevent a full-blown trade war just weeks before retaliatory tariffs were set to snap back into force.

The talks, led by U.S. Commerce Secretary Howard Lutnick and China's Vice Commerce Minister Li Chenggang, mark a follow-up to the earlier consensus achieved during the Geneva discussions last month. The Geneva agreement, while promising, faltered amid ongoing Chinese restrictions on rare earth exports—vital to numerous high-tech industries—and retaliatory U.S. export controls. The London framework aims to bridge those gaps by outlining steps both sides must now seek final approval for from their respective presidents, Donald Trump and Xi Jinping.

Lutnick described the deal as putting “meat on the bones” of the Geneva consensus. "We’ve reached a framework to implement the call between the two presidents and the consensus in Geneva," he said, emphasizing that the deal's implementation hinges on presidential sign-off. Li echoed the sentiment, calling the framework a positive result from the recent diplomatic momentum created by a rare phone call between Trump and Xi on June 5.

At the heart of the agreement is the commitment to lift Chinese restrictions on exports of rare earth minerals and magnets, which are indispensable in electric vehicles, defense technologies, and consumer electronics. China controls a near-monopoly on the global rare earth supply, and its suspension of these exports in April upended several international supply chains.

In response, the U.S. had imposed its own curbs, halting shipments of key technology products to China including semiconductor design software, chemicals, and aviation parts. Lutnick confirmed that the U.S. would roll back some of these restrictions if China follows through on its commitments. “Expect those to come off in a balanced way,” he noted, referencing President Trump's desire for proportional de-escalation.

Although the agreement is a step forward, it falls short of resolving deeper, more systemic trade tensions. Chief among these are U.S. objections to China's state-led economic practices and Trump’s sweeping unilateral tariffs, which were designed to rebalance trade but have led to considerable market disruption.

The tariffs in question—some as high as 145%—remain in legal and political limbo. A recent U.S. appeals court decision allowed Trump’s 34% “reciprocal” tariffs to remain in place while under legal review, maintaining pressure on Beijing. If no comprehensive deal is reached by August 10, both countries could see tariffs spike sharply: U.S. rates would jump from about 30% to 145%, while Chinese tariffs could rise from 10% to 125%.

Markets responded cautiously to the news, with the MSCI’s Asia-Pacific index outside Japan nudging up by 0.2%. Analysts said the muted reaction reflected investor skepticism and the expectation that the announcement was already priced in. Chris Weston, head of research at Pepperstone, noted that “the devil will be in the details,” especially regarding how much rare earth material will now flow to the U.S. and how easily American technology can reach Chinese markets.

The broader economic context remains challenging. The World Bank this week cut its global growth forecast for 2025 to 2.3%, citing escalating tariffs and geopolitical uncertainty. U.S. exporters have already faced reduced access to the Chinese market. Customs data showed a dramatic 34.5% drop in Chinese exports to the U.S. in May—the steepest decline since the height of the COVID-19 pandemic.

Domestically, the impact on the U.S. economy has been mixed. While inflation and unemployment have remained relatively stable, tariffs have dented business confidence, complicated supply chains, and put pressure on the dollar. The ongoing volatility has left industries—from electronics to agriculture—uncertain about future planning.

The presence of top U.S. officials at the London talks, including U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent, underscored the urgency of the negotiations. Although Bessent left early to testify before Congress, his involvement highlighted the domestic scrutiny the Biden administration (and Trump as candidate) is under to manage the high-stakes economic rivalry with China effectively.

Ultimately, the framework represents a cautious reset. As Josh Lipsky of the Atlantic Council put it, “They are back to square one, but that’s much better than square zero.” Whether that square leads to real progress or yet another breakdown will depend heavily on how both sides follow through before the August deadline. For now, the world watches as Washington and Beijing attempt to avoid tipping back into an all-out economic confrontation.

Reference From: www.ndtv.com