LONDON (BN24) — The United States and China reached a preliminary agreement Tuesday aimed at reducing bilateral export restrictions and preserving a fragile trade truce, though deep-rooted economic tensions remain unresolved.
After two days of negotiations in London, U.S. Commerce Secretary Howard Lutnick announced that both sides had agreed on a framework to implement the consensus reached last month in Geneva. That earlier deal, which sought to ease retaliatory tariffs that had soared into the triple digits, had faltered due to China’s continued restrictions on rare earth mineral exports and Washington’s new export controls.
Lutnick said the London agreement includes a “balanced” rollback of Chinese export restrictions on rare earths and some recent U.S. export controls on advanced technologies like semiconductor software and aerospace goods, though he offered no specifics. “We have reached a framework to implement the Geneva consensus and the call between the two presidents,” he told reporters, noting both sides will now seek final approval from their respective leaders before implementation.
Chinese Vice Commerce Minister Li Chenggang confirmed a deal had been reached “in principle,” which will be presented to U.S. President Donald Trump and Chinese President Xi Jinping.
The talks came amid ongoing volatility in global markets following Trump’s unpredictable tariff measures, which have disrupted ports and strained corporate balance sheets worldwide. The World Bank, citing trade uncertainty, downgraded its global growth forecast for 2025 to 2.3%, warning that rising tariffs were a “significant headwind” to economic stability.
While the framework may prevent the collapse of the Geneva agreement, analysts remain skeptical about its durability. “They are back to square one but that’s much better than square zero,” said Josh Lipsky of the Atlantic Council’s GeoEconomics Center. Major points of contention, including unilateral tariffs and China’s state-led economic model, remain unaddressed.
If no broader agreement is reached by the August 10 deadline, retaliatory tariff rates will snap back to 145% for U.S. imports from China and 125% for Chinese goods entering the U.S., up from current reduced levels of about 30% and 10%, respectively.
Financial markets responded cautiously. MSCI’s Asia-Pacific index excluding Japan rose 0.57%, with investors largely pricing in expectations. “The devil will be in the details,” said Chris Weston of Pepperstone in Melbourne. “Markets are waiting to see the actual terms, especially regarding rare earth flows to the U.S. and chip exports back to China.”
Signs of progress emerged as several Chinese rare earth magnet producers, including JL MAG Rare-Earth, Innuovo Technology, and Beijing Zhong Ke San Huan, confirmed they had received new export licenses from Chinese authorities. China dominates global supply chains for rare earth magnets, which are essential in electric vehicles and military equipment.
In April, Beijing halted exports of several critical minerals, causing global disruptions. The U.S. retaliated in May by restricting shipments of semiconductor design software, aviation equipment, and chemicals, revoking previously issued licenses.
China’s overall exports to the U.S. plummeted 34.5% in May, the steepest drop since the COVID-19 pandemic, according to customs data released this week. While the tariffs’ direct impact on U.S. inflation and employment has been limited, business confidence has weakened and the dollar has come under sustained pressure.
European Central Bank President Christine Lagarde, speaking in Beijing on Wednesday, warned that prolonged trade disputes could result in lasting economic damage unless all parties address underlying policy imbalances.
Meanwhile, global industry leaders—including those from Mexico, the European Union, Japan, Canada, and aerospace firms—urged Washington to reconsider further tariffs on commercial aircraft parts, citing the potential for widespread disruptions.
Shortly after the framework was announced, a U.S. appeals court allowed Trump’s broadest tariff orders to remain in effect while reviewing a lower court ruling that questioned the legality of his sweeping trade powers. This keeps Trump’s 34% “reciprocal” tariffs on Chinese imports in place, sustaining one of his key leverage points.
Despite uncertainty, some observers viewed the London framework as a step toward stability. “Fighting a trade war in the context of global integration is a lose-lose situation for both sides,” said Peter Wu, a 28-year-old lawyer in Beijing. “This is a good signal.”
For now, both nations appear committed to avoiding immediate escalation. But the next two months will be critical as officials work to transform their fragile framework into a durable agreement that can withstand political and economic pressure on both sides.
