After meeting for several months in an effort to develop a longer-term trade deal, the U.S. and China are closing in on a trade deal that could calm global markets in the coming months.
A deal between the world’s two largest economies would be a major development, as July is quickly approaching, and U.S. President Donald Trump had paused higher tariffs against China and other countries until July.
Trump and China both had positive words to say on the matter.
Earlier today, President Trump calmed the trade deal was “done.” China, for its part, called the ongoing talks with the U.S. “reasonable” and “frank”, choosing its words carefully.
After months of on-again, off-again talks, the U.S. and China escalated talks with higher-level discussions in London the last few days. The talks appeared to yield a deal that is more palatable to both parties: 55% tariffs on Chinese goods by the U.S. and 10% tariffs on U.S. goods by China. This is much lower than the triple-digit tariffs imposed by both countries earlier this year, which helped lead to a major stock market selloff.
The importance of “rare earth minerals”
One major concern of the U.S. was access to “rare earth minerals”. The U.S. requires access to rare earth minerals in order to produce everything from everyday electronics to military equipment such as missiles, tanks, and more. Prior to, and during the trade talks, China purposely limited access to these rare earth minerals as a tool and leverage to produce better trade deal terms. This latest deal helps loosen access to rare earth minerals, at least for the next few months. China is reserving its right to tighten the supply in order to extract further trade negotiation leverage in the future.
Trump also called his relationship with Chinese President Xi Jinping “excellent”, despite President Xi’s efforts to align closer with Russia and other U.S. foes amid the trade war and a general deterioration of relations.
What’s next?
It should be emphasized that the deal is not yet done, and things are very fluid and can change at any minute, as has been the case throughout Trump’s tariff war. In general, the reaction to the new trade deal progress was mixed, with some critics saying that the deal is far from done, while others noted the U.S.’s remarkable flexibility on some items such as export controls on technology, and other areas where the U.S. previously did not want to negotiate. This is a sign that the Chinese government holds more leverage than the U.S. wants to admit on this front.
