China and US Reach Trade Deal Framework, Lift Trade Tensions

Strategic Insights -

The US and China have made significant progress in trade talks, with China confirming yesterday that the two sides had reached a framework for a trade deal. Under the agreement, China will review and approve export control items, while the US will lift "restrictive measures" against China. The deal comes after months of tense negotiations, with the US seeking to ensure the supply of rare earths essential for products such as electric vehicles, hard drives, and national defense equipment.

Key Takeaways:

  • China will review and approve export control items that meet requirements under the law, while the US will cancel restrictive measures against China.
  • The US had been seeking to ensure the supply of rare earths, which are essential for products such as electric vehicles, hard drives, and national defense equipment.
  • China dominates global production of rare earths, and had begun requiring export licenses in early April, a move seen as a response to tariffs imposed by the Trump administration.
  • The two sides had agreed in May to temporarily lower steep tit-for-tat tariffs, but US officials later accused China of violating the pact and slow-walking export license approvals.
  • The deal marks a significant easing of trade tensions between the two nations, with stock markets in Asia and Europe rising on hopes of a delay in tariffs.

Statistics:

  • The US had imposed a 10% tariff on most trading partners this year, and had paused higher rates on dozens of economies while negotiations took place.
  • The deadline for steeper tariffs is July 9, and the White House has indicated that it could extend this deadline.
  • China dominates global production of rare earths, producing over 60% of the world's total.

Sources:

  • AFP
  • White House official statement
  • Commerce ministry statement