U.S. and China Reach Trade Deal to Ease Export Curbs and Maintain Tariff Truce

The United States and China have reached a preliminary agreement to ease export restrictions and prevent a steep rise in tariffs. However, deeper disagreements between the two economic powers remain unresolved.

What’s in the New Deal?

After two days of talks in London, U.S. Commerce Secretary Howard Lutnick confirmed that the agreement builds on the earlier understanding reached in Geneva. The main points include:

• Lowering retaliatory tariffs
• Easing export restrictions, especially on rare earth elements
• Avoiding further escalation in trade tensions

He added that both governments will now present this framework to President Joe Biden and President Xi Jinping for final review.

China to Lift Rare Earth Export Ban

One of the biggest breakthroughs is China’s decision to remove its export ban on rare earth minerals — key materials used in electric vehicles and high-tech products.

In return, the U.S. will ease its own export controls. Lutnick described the deal as a “fair and balanced exchange” between the two nations.

What Remains Unresolved?

Although the agreement helps avoid immediate damage, key issues are still on the table, including:

• U.S. concerns over China’s state-controlled economic model
• Tariffs imposed during the Trump administration
• China’s continued trade surplus with the U.S.

Josh Lipsky said the deal is progress, even if key issues remain. Talking is better than no dialogue at all.

Deadline: August 10

• U.S. tariffs may rise from 30% to 145%
• Chinese tariffs could jump from 10% -125%

This deadline increases pressure on both sides to resolve their differences soon.

Market Response: Hopeful but Cautious

Financial markets responded with mild optimism. The MSCI Asia-Pacific Index (excluding Japan) rose by 0.57%. Analysts say investors welcome the progress but want clear details on product lists and export rules.

Chris Weston from Pepperstone noted, “Markets are watching closely to see how much rare earth supply will be restored to the U.S., and whether American tech can again be freely shipped to China.”

Global Impact

The U.S.-China trade conflict has already had a global impact:

• Slowed down international trade
• Increased port delays
• Cost businesses billions
• Lowered global growth (World Bank cut 2025 forecast to 2.3%)

During a visit to China, ECB President Christine Lagarde warned that all countries must work together to avoid deeper economic problems.

Trump-Xi Phone Call Paved the Way

The recent agreement was supported by a rare direct phone conversation between Presidents Trump and Xi, which helped restart the negotiation process with clearer goals.

China’s Exports to U.S. Decline

New figures show that China’s exports to the U.S. fell by 34.5% in May — the largest drop since the COVID-19 pandemic. Although U.S. inflation remains stable, economic pressure is growing for both sides.

Tariff Legal Status

Despite the agreement, a U.S. appeals court has temporarily upheld former President Trump’s tariffs. These 34% tariffs remain legally paused, but could be reactivated if talks collapse again.

Conclusion: A Step Forward, But Not the End

The latest trade framework between the U.S. and China is a welcome move toward easing tensions. While it prevents an immediate tariff hike, the deal is just a starting point. Both countries now face a tight timeline to address the more serious trade disagreements before the August 10 deadline.