US and China Reach Trade War Truce Deal in London

Strategic Insights -

US President Donald Trump announced a deal to restore the trade war truce between the US and China, reached in London after two days of marathon negotiations. The breakthrough revives a truce agreed in Geneva last month, which faltered due to differences over Chinese rare earth exports and US export controls. The deal includes China supplying rare earths "up front" and the US meeting its commitments, including Chinese students using US colleges and universities.

Key Takeaways:

  • The trade war truce deal was reached in London after two days of marathon negotiations between US and Chinese officials.
  • The deal revives a truce agreed in Geneva last month, which faltered over differences on Chinese rare earth exports and US export controls.
  • China agreed to supply rare earths "up front" to the US, while the US will meet its commitments, including allowing Chinese students to use US colleges and universities.
  • The agreement does not mention US export controls on chips.
  • A senior White House official hinted that Trump could ease restrictions on selling chips to China in exchange for accelerated rare earth exports.
  • The US and China agreed to slash their respective tariffs by 115 percentage points in Geneva last month, with a 90-day window to resolve the trade war.
  • Chinese exports to the US fell more steeply in May compared to the same period last year, with a decline of -24.5% year-over-year.
  • US federal appeals courts have allowed Trump's broadest tariffs to remain, while reviewing a lower court ruling that blocked his "liberation day" levies on US trading partners.

Statistics:

  • Chinese exports to the US declined by -24.5% year-over-year in May 2023, compared to the same period last year.
  • The US and China agreed to slash their respective tariffs by 115 percentage points in Geneva last month.
  • The trade disagreement led to a 90-day window to resolve the trade war between the US and China.
  • Chinese rare earth exports to the US were a point of contention in the negotiations.
  • The US has paused the broader "reciprocal" tariffs for 90 days, allowing for further negotiations.

Sources:

  • "[Donald Trump] has said a deal to restore the trade war truce between the US and China is 'done', after two days of marathon negotiations in London." - Source: Truth Social network posting.
  • "The deal revived a truce agreed in Geneva last month that subsequently faltered because of differences over Chinese rare earth exports and US export controls." - Source: US President Donald Trump's Truth Social network post.
  • Li Chenggang, China's vice-minister of commerce, described the London talks as "rational, in-depth and candid" - Source: Xinhua.
  • "US team for the talks included Scott Bessent, Treasury secretary, Howard Lutnick, commerce secretary, and US trade representative Jamieson Greer." - Source: The Financial Times.
  • A US federal appeals court has allowed some of Trump's broadest tariffs to remain, while reviewing a lower court ruling that had blocked his "liberation day" levies on US trading partners. - Source: AP News.