The United States and China reached a tentative framework agreement on Tuesday aimed at averting a full-blown escalation in their ongoing trade dispute, with both sides agreeing to ease export restrictions and maintain a fragile tariff truce.
The understanding, reached after two days of intensive negotiations in London, offers a temporary reprieve for global markets rattled by the tit-for-tat trade measures that had sent bilateral tariffs soaring to unprecedented levels.
U.S. Commerce Secretary Howard Lutnick, speaking to reporters after midnight London time, said the new framework added “meat on the bones” to an earlier agreement brokered in Geneva last month but left unresolved over China’s restrictions on critical mineral exports.
“We have reached a framework to implement the Geneva consensus and the call between the two presidents,” Lutnick said. “Now, both sides will take this framework back to their respective leaders for final approval.”
Chinese Vice Commerce Minister Li Chenggang confirmed that consensus had been reached in principle to implement the outcomes of the June 5 phone call between President Donald Trump and President Xi Jinping, as well as the Geneva talks.
Rare earth curbs to be lifted
A key feature of the agreement is China’s pledge to lift curbs on exports of rare earth minerals and magnets, which are vital for the production of electric vehicles, renewable energy technologies and military equipment.
In turn, the U.S. signalled readiness to ease some of its own export controls, which had recently targeted China’s access to semiconductor design software, aviation equipment and critical chemicals. However, specific details of the rollback were not immediately disclosed.
“These restrictions were imposed when China halted rare earth shipments, and as President Trump has said, this needs to be resolved in a balanced way,” Lutnick added.
China holds a near-monopoly on the global supply of rare earth magnets and had in April abruptly suspended a wide range of exports, disrupting supply chains and prompting retaliatory measures from Washington.
Tariff threat remains
Despite the framework, fundamental differences persist over broader trade grievances, particularly President Trump’s sweeping tariffs imposed under his “Liberation Day” policy. The U.S. side maintains longstanding complaints about China’s state-led, export-driven economic model.
Senior officials from both delegations acknowledged that the framework does not constitute a comprehensive resolution. A final deal must be reached by August 10, or tariffs are scheduled to snap back to punitive levels — rising from 30% to 145% on U.S. imports from China, and from 10% to 125% on Chinese imports from the U.S.
Josh Lipsky, senior director at the Atlantic Council’s GeoEconomics Center in Washington, said the talks merely restored the status quo.
“They are back to square one, but that’s much better than square zero,” he remarked.
Muted market response
Global investors reacted cautiously to the announcement. MSCI’s broad index of Asia-Pacific shares outside Japan rose 0.2%, suggesting the framework was already priced in.
“The devil will be in the details,” said Chris Weston, head of research at Pepperstone in Melbourne. “The lack of market reaction indicates this outcome was expected, but headlines that suggest constructive dialogue should support risk assets.”
The World Bank on Tuesday revised its 2025 global growth forecast downward by 0.4 percentage points to 2.3%, citing heightened trade tensions as a “significant headwind” for the global economy.
Leaders’ call crucial to breakthrough
The second round of U.S.-China talks was buoyed by a rare direct phone call between President Trump and President Xi last week. Lutnick confirmed that the call provided “clear directives” that were incorporated into the Geneva consensus and ultimately shaped the framework in London.
Meanwhile, U.S. Treasury Secretary Scott Bessent, who participated in the London talks, departed early to testify before Congress, while Trade Representative Jamieson Greer remained until the conclusion.
Recent trade data showed China’s exports to the U.S. plunged 34.5% in May, the steepest monthly decline since the onset of the COVID-19 pandemic, underscoring the economic toll of ongoing frictions. Though U.S. inflation and employment data have shown limited immediate impact, business confidence and the dollar remain under pressure.
Legal uncertainty looms
Even as negotiators hailed the framework, legal uncertainty remains. A U.S. appeals court on Tuesday allowed Trump’s sweeping “reciprocal” tariffs — currently suspended — to stay in effect pending further review, following a lower court’s ruling that the duties exceeded presidential authority.
This decision preserves a critical leverage point for Washington and could complicate future trade discussions, analysts said.
While the current agreement may prevent the unraveling of the Geneva deal, observers remain skeptical about the prospects for a broader settlement in the near term.
