The tariff talks between the US and China, which have raised concerns about global trade being squeezed, are ongoing. High-level trade talks in London are continuing with the rare earths agenda. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer are on the US side, while the Chinese delegation is led by Deputy Prime Minister He Lifeng. The talks offer a glimmer of hope that the world’s two largest economies can ease tensions over China’s dominance in rare earth minerals.
Investors are hoping that the relief created by the preliminary trade agreement reached in Geneva last month can improve relations between the two superpowers after Washington accused Beijing of blocking exports critical to sectors such as automotive, aerospace, semiconductor and defense.
US-China trade tensions have stalled for a while after escalating above 100% this year with a series of tariff hikes on each other’s goods. The Geneva agreement was intended to pave the way for a broader easing of tensions, but subsequent talks quickly stalled as recriminations mounted.
Both sides accuse each other of violating a trade agreement they signed in Geneva in May to defuse the war. Relations have been strained since Donald Trump returned to the White House, adding to uncertainty for companies and investors. According to customs data, China’s exports to the United States fell 34.5% in May, the sharpest decline since February 2020, when the pandemic disrupted global trade.
The United States has complained about a drop in shipments of rare earth magnets needed for American electric vehicles and defense systems, while China has reacted to tightening U.S. restrictions on Huawei’s artificial intelligence chips, access to other advanced technologies and crackdowns on foreign students in the United States. Trump’s moratorium on U.S. tariffs on Chinese goods is set to expire in August unless he decides to extend them. If no deal is reached, the White House said it plans to either restore the tariffs to the levels Trump first announced in April or reduce them to levels that exceed the current 10% base rate.
China announced on Saturday that it had approved some applications for rare earth exports, without specifying which countries or sectors were involved. The announcement came after Trump said on Friday that Chinese President Xi Jinping had agreed to restart the flow of minerals and magnets containing the materials. “We want to continue to have the flow of rare earths and magnets that are vital for cell phones and everything else, just like in early April, and we don’t want any technicalities that will slow that down. We’ve made that clear to them,” Kevin Hassett, the director of the White House National Economic Council, said on Sunday.
Rare earths are at the heart of many strategic products, from electric vehicles to fighter jets. China accounts for 69% of global production in the field, while the U.S. is dependent on the resources. The talks are not just about “trade.” It’s also about technological superiority, geopolitical balance of power and supply chain security. The US wants to restore rare earth imports from China to pre-April levels. China, in turn, has been critical of US restrictions on chip design software, aircraft engines and visas for more than 280,000 Chinese students.
Trump also made a positive comment on relations that have been on a roller coaster since he took office in January, saying on social media that he expected the talks to go “very well.” While a phone call between Trump and Xi last week raised hopes on Wall Street that tariffs would be reduced between the trading partners, investor optimism was limited. Despite promising to reshape US trade relations, the US president signed only one new trade deal with the UK.
The Geneva meeting has once again highlighted the difficulty of reaching an agreement between China and the US. “There was a lot of deliberate confusion, misunderstanding or misinterpretation on both sides, depending on the perspective,” said Josh Lipsky, director of international economics at the Atlantic Council. “They left too much open to interpretation, and they paid the price for it in the weeks that followed.”
The rare earth minerals in question are used in major industries from semiconductors to energy, and in a range of sub-industries from cell phones to magnets. China’s dominance of this market with a 69% share makes today’s talks even more important, as reaching an agreement on rare earth minerals used by the US’s largest technology and energy companies could significantly reduce pressure on these companies.
