Key points
- Deal should resolve rare earth minerals, magnet curbs: Lutnick
- US-China negotiations took place over two days in London
- Deal aims to keep Geneva trade truce on track
- Trump and Xi to review framework agreement: Officials
ISLAMABAD: United States (US) and Chinese officials said on Tuesday they had agreed on a framework to put their trade truce back on track and remove China’s export restrictions on rare earths while offering little sign of a durable resolution to longstanding trade differences.
“Meat on the bones”
According to Reuters, at the end of two days of intense negotiations in London, US Commerce Secretary Howard Lutnick told reporters the framework deal puts “meat on the bones” of an agreement reached last month in Geneva to ease bilateral retaliatory tariffs that had reached crushing triple-digit levels.
— Howard Lutnick (@howardlutnick) June 11, 2025
But the Geneva deal had faltered over China’s continued curbs on critical minerals exports, prompting the Trump administration to respond with export controls of its own preventing shipments of semiconductor design software, aircraft and other goods to China.
Lutnick said the agreement reached in London would remove some of the recent US export restrictions, but did not provide details after the talks concluded around midnight London time (2300 GMT).
“We have reached a framework”
“We have reached a framework to implement the Geneva consensus and the call between the two presidents,” Lutnick said. “The idea is we’re going to go back and speak to President Trump and make sure he approves it. They’re going to go back and speak to President Xi and make sure he approves it, and if that is approved, we will then implement the framework.”
We have reached a framework to implement the Geneva consensus and the call between the two presidents.” – US Commerce Secretary Howard Lutnick
In a separate briefing, China’s Vice Commerce Minister Li Chenggang also said a trade framework had been reached in principle that would be taken back to US and Chinese leaders.
The dispute may keep the Geneva agreement from unravelling over duelling export controls, but does little to resolve deep differences over Trump’s unilateral tariffs and longstanding US complaints about China’s state-led, export-driven economic model.
“Better than square zero”
The two sides left Geneva with fundamentally different views of the terms of that agreement and needed to be more specific on required actions, said Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center in Washington.
“They are back to square one but that’s much better than square zero,” Lipsky added.
The two sides have until August 10 to negotiate a more comprehensive agreement to ease trade tensions, or tariff rates will snap back from about 30 per cent to 145 per cent on the US side and from 10 per cent to 125 per cent on the Chinese side.
Investors, who have been badly burned by trade turmoil before, offered a cautious response and MSCI’s broadest index of Asia-Pacific shares outside Japan, opens new tab rose 0.57 per cent.
“Devil will be in the details”
“The devil will be in the details, but the lack of reaction suggests this outcome was fully expected,” said Chris Weston, head of research at Pepperstone in Melbourne.
“The details matter, especially around the degree of rare earths bound for the US, and the subsequent freedom for US-produced chips to head east, but for now as long as the headlines of talks between the two parties remain constructive, risk assets should remain supported.”
Lutnick said China’s restrictions on exports of rare earth minerals and magnets to the US will be resolved as a “fundamental” part of the framework agreement.
“Also, there were a number of measures the United States of America put on when those rare earths were not coming,” Lutnick said. “You should expect those to come off … in a balanced way.”
Trump’s shifting tariff policies
US President Donald Trump’s shifting tariff policies have roiled global markets, sparked congestion and confusion in major ports, and cost companies tens of billions of dollars in lost sales and higher costs. The World Bank on Tuesday slashed its global growth forecast for 2025 by four-tenths of a percentage point to 2.3 per cent, saying higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.
A resolution to the trade war may require policy adjustments from all countries to treat financial imbalances or otherwise greatly risk mutual economic damage, European Central Bank President Christine Lagarde said on a rare visit to Beijing on Wednesday.
Phone call helped
The second round of US-China talks was given a major boost by a rare phone call between Trump and Chinese President Xi Jinping last week, which Lutnick said provided directives that were merged with Geneva truce agreement.
Customs data published on Monday showed that China’s exports to the US plunged 34.5 per cent in May, the sharpest drop since the outbreak of the Covid pandemic.
While the impact on US inflation and its jobs market has so far been muted, tariffs have hammered US business and household confidence and the dollar remains under pressure.
Lutnick was joined by US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent at the London talks. Bessent departed hours before their conclusion to return to Washington to testify before Congress on Wednesday.
Rare earth magnets
China holds a near-monopoly on rare earth magnets, a crucial component in electric vehicle motors, according to Reuters.
“The Middle East has oil. China has rare earths,” Deng Xiaoping, the late Chinese leader whose pro-market reforms set the country on its path to becoming an economic powerhouse, said in 1992, according to AFP.
Since then, Beijing’s heavy investment in state-owned mining firms and lax environmental regulations compared to other industry players have turned China into the world’s top supplier. The country now accounts for 92 per cent of global refined output, according to the International Energy Agency. However, the flow of rare earths from China to manufacturers around the world has slowed after Beijing in early April began requiring domestic exporters to apply for a licence – widely seen as a response to US tariffs.
Under the new requirements – which industry groups have said are complex and slow-moving – seven key elements and related magnets require Beijing’s approval to be shipped to foreign buyers.
China’s decision in April to suspend exports of a wide range of critical minerals and magnets upended global supply chains, according to Reuters.
In May, the US responded by halting shipments of semiconductor design software and chemicals and aviation equipment, revoking export licences that had been previously issued.
Trump’s legal authority
China, Mexico, the European Union, Japan, Canada and many airlines and aerospace companies worldwide urged the Trump administration not to impose new national security tariffs on imported commercial planes and parts, according to documents released Tuesday.
Just after the framework deal was announced, a US appeals court allowed Trump’s most sweeping tariffs to stay in effect while it reviews a lower court decision blocking them on grounds that they exceeded Trump’s legal authority by imposing them.
The decision keeps alive a key pressure point on China; Trump’s currently suspended 34 per cent “reciprocal” duties that had prompted swift tariff escalation.
