LONDON--U.S. and Chinese officials said on Tuesday they had agreed on a framework to put their trade truce back on track and remove China's export restrictions on rare earths while offering little sign of a durable resolution to longstanding trade differences.
At the end of two days of intense negotiations in London, U.S. Commerce Secretary Howard Lutnick told reporters the framework deal puts "meat on the bones" of an agreement reached last month in Geneva to ease bilateral retaliatory tariffs that had reached crushing triple-digit levels.
But the Geneva deal had faltered over China's continued curbs on critical minerals exports, prompting the Trump administration to respond with export controls of its own preventing shipments of semiconductor design software, chemicals and other technology goods to China.
Lutnick said the agreement reached in London would remove some of the recent U.S. export restrictions, but did not provide details after the talks concluded around midnight London time."We have reached a framework to implement the Geneva consensus and the call between the two presidents," Lutnick said. "The idea is we're going to go back and speak to President Trump and make sure he approves it. They're going to go back and speak to President Xi and make sure he approves it, and if that is approved, we will then implement the framework."
In a separate briefing, China's Vice Commerce Minister Li Chenggang also said a trade framework had been reached that would be taken back to U.S. and Chinese leaders."The two sides have, in principle, reached a framework for implementing the consensus reached by the two heads of state during the phone call on June 5th and the consensus reached at the Geneva meeting," Li told reporters.
The dispute may keep the Geneva agreement from unravelling over duelling export controls, but does little to resolve deep differences over Trump's unilateral tariffs and longstanding U.S. complaints about China's state-led, export-driven economic model.The two sides left Geneva with fundamentally different views of the terms of that agreement and needed to be more specific on required actions, said Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center in Washington.
"They are back to square one but that’s much better than square zero," Lipsky added.
The two sides have until August 10 to negotiate a more comprehensive agreement to ease trade tensions, or tariff rates will snap back from about 30% to 145% on the U.S. side and from 10% to 125% on the Chinese side.Investors, who have been badly burned by trade turmoil before, offered a cautious response and MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%.
"The devil will be in the details, but the lack of reaction suggests this outcome was fully expected," said Chris Weston, head of research at Pepperstone in Melbourne."The details matter, especially around the degree of rare earths bound for the U.S., and the subsequent freedom for U.S.-produced chips to head east, but for now as long as the headlines of talks between the two parties remain constructive, risk assets should remain supported."
Lutnick said China's restrictions on exports of rare earth minerals and magnets to the U.S. will be resolved as a "fundamental" part of the framework agreement."Also, there were a number of measures the United States of America put on when those rare earths were not coming," Lutnick said. "You should expect those to come off, sort of as President Trump said, in a balanced way."
