Negotiators seek to stabilise fragile Geneva truce as rare earths and chip curbs dominate agenda
The United States and China have resumed trade negotiations in London, with top officials from both sides meeting at Lancaster House in a bid to reinforce a tenuous truce struck last month in Geneva. The talks come amid renewed diplomatic strain and fresh economic data underscoring the damage from the ongoing tariff war.
US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer are leading the American delegation. China’s Vice Premier He Lifeng, who also heads Beijing’s trade team, is representing the Chinese side.
The agenda is focused on two critical points of contention: China’s curbs on exports of rare earths—key minerals used in technologies from electric vehicles to defence—and Washington’s restrictions on advanced semiconductor and AI-related exports to Chinese firms.
Rare earths as leverage
The US has accused Beijing of failing to honour the terms of the Geneva deal, which slashed reciprocal tariffs—Washington’s from 145% to 30%, and Beijing’s from 125% to 10%—in exchange for a temporary easing of trade restrictions. In particular, US officials have cited delays in China’s approval of rare earth export licences.
Beijing, meanwhile, has approved a limited number of export applications and signalled openness to further dialogue. On Saturday, the Ministry of Commerce announced plans to establish a “green channel” for rare earth exports to Europe, and Reuters reported that suppliers to major US automakers—General Motors, Ford, and Stellantis—have received temporary six-month licences.
Still, analysts warn that China is unlikely to relinquish its strategic grip over the rare earths supply chain, where it controls 90% of global processing. “It’s a calibrated yet assertive tool for strategic influence,” said Robin Xing, chief China economist at Morgan Stanley.
Stalemate over semiconductor restrictions
While Beijing seeks greater access to US-origin chip technology, Washington appears unwilling to lift restrictions on advanced AI-enabling semiconductors. Hassett confirmed the US would maintain controls on “very high-end Nvidia chips,” citing national security concerns, though some easing on lower-tier microchips could be on the table.
Swetha Ramachandran, a fund manager at Artemis, noted the geopolitical stakes: “There are enough chips on the table here that could make it acceptable for both sides to walk away with desired outcomes.”
Trade data show mounting costs
The latest trade figures from China show a sharp decline in shipments to the US, reflecting the toll of the tariff dispute. Chinese exports to the US plunged 34.5% in May—the steepest drop since early 2020—while imports from the US fell over 18%. China’s trade surplus with the US shrank by more than 40% to US$18bn.
Overall exports grew 4.8% year-on-year in May, missing expectations, while imports dropped 3.4%, significantly worse than the forecast 0.9% decline. Chinese authorities blamed weak domestic demand and the lagging effects of trade disruptions.
Rare earth exports were down 5.7% from a year earlier, while exports of cars and ships rose. Smartphone and home appliance exports fell around 10% and 6%, respectively.
The broader economic outlook remains fragile. Factory-gate prices dropped 3.3% year-on-year in May—the steepest fall in nearly two years—while consumer prices edged down 0.1%, indicating persistent deflationary pressure.
Global implications and fragile truce
Despite last month’s Geneva agreement, each side has accused the other of backsliding. Washington has criticised China’s delays in mineral exports, while Beijing objects to US visa restrictions and new export bans on chip design software.
Meanwhile, Europe has become an unintended collateral victim. European automakers such as Stellantis and Volkswagen face rare earth shortages due to China’s April restrictions. China’s new licensing reforms may ease immediate concerns, but doubts remain over whether approvals will scale up fast enough.
Maximilian Butek of the German Chamber of Commerce in China called China’s weekend move “certainly good news,” but added, “It is a huge bureaucratic monster… I’m not sure if they really can now speed up the process.”
As the talks in London continue, expectations remain low for a full resolution. “This is only just starting,” said Rebecca Harding, CEO of the Centre for Economic Security. “It’s about how these two economies actually compete and survive in a digital world. Effectively, it’s a battle for the 21st century.”
