US-China trade truce back on track after London talks

The US and China have reached a new framework to revive their trade truce, with both sides signaling readiness to ease tariffs and resolve rare earth export issues.

After two intense days of negotiations in London, the US and China have agreed to a trade framework that revives the truce initiated in Geneva. Tensions had escalated when both sides accused each other of not fulfilling commitments related to rare earth exports and export controls.

US Commerce Secretary Howard Lutnick, Trade Representative Jamieson Greer, and Treasury Secretary Scott Bessent led the American delegation. Lutnick hinted that rare earth-related disputes are close to resolution, with the US willing to lift certain restrictions “in a balanced way,” depending on China's compliance. President Trump is expected to review the proposal soon.

The Chinese side, represented by Vice-Premier He Lifeng and Commerce Vice-Minister Li Chenggang, described the talks as “rational and candid.” They emphasized rebuilding trust and reaffirmed commitments made in previous meetings, including a 90-day tariff reduction window.

Market reaction was cautiously optimistic: China’s CSI 300 rose by 0.8% and Hong Kong’s Hang Seng gained 1%, while S&P 500 futures dipped slightly. The talks were hosted at London’s Lancaster House, with both delegations aiming to avoid a return to the damaging tit-for-tat tariffs that had significantly reduced trade volume since the pandemic.

The outcome marks a possible shift from Biden-era policies, with Trump potentially relaxing controls on US chip sales if China expedites rare earth exports. However, some restrictions remain under review by US courts, suggesting ongoing uncertainty around broader trade policies.