Framework agreement follows London talks; rare earths pledged, tariffs remain high
President Donald Trump has declared a trade deal with China “done,” pending final approval by Chinese President Xi Jinping, after negotiators from both sides concluded two days of talks in London aimed at reviving the tariff truce struck last month in Geneva.
Under the framework deal, China has reportedly agreed to supply the United States with “full magnets and any necessary rare earths” up front, while the US will maintain its 55% tariff level on Chinese goods. Trump, posting to Truth Social, said the relationship was “excellent,” adding that Chinese students would continue to be welcomed at American universities—“which has always been good with me!”
Despite the celebratory tone, officials from both sides acknowledged that much remains unresolved. US Commerce Secretary Howard Lutnick described the outcome as a framework that “puts meat on the bones” of the earlier Geneva consensus, with both parties now expected to brief their respective leaders. Lutnick, speaking on CNBC, emphasised that current US tariffs on China would not change. “You can definitely say that,” he said when asked if they were now fixed.
The White House clarified that the 55% tariff figure mentioned by Trump includes a 10% baseline duty, a 25% tranche from Trump’s first term, and a 20% surcharge related to fentanyl trafficking. Chinese tariffs on US goods remain at 10%.
One of the key breakthroughs in London was China’s pledge to ease its export restrictions on rare earths and magnets—materials critical to the US automotive, electronics, and defence industries. In return, the US is expected to scale back some recently imposed export controls, though curbs on advanced semiconductor technology will remain in place.
Yet questions linger about implementation. China will only grant six-month import licenses for rare earths, raising concerns over supply chain stability. A Wall Street Journal report noted that this short-term licensing regime leaves US firms vulnerable to future export disruptions.
Beijing had previously restricted exports in retaliation for Trump’s trade war escalation in April, which saw US tariffs spike to 145% before easing to 30% under the Geneva truce. That truce also gave both sides a 90-day window—set to expire in August—to strike a lasting agreement.
Markets reacted cautiously to the announcement. The S&P 500 was little changed, while Chinese equities edged higher. Analysts noted the absence of concrete terms leaves scope for renewed tensions. “Setting the Geneva ‘pause’ back on track is the smallest of accomplishments,” said Terry Haines of Pangaea Policy, warning against overestimating the deal’s significance.
Lutnick said the US and China were previously locked in “mutual assured annoyance,” but credited Trump’s recent phone call with Xi for breaking the impasse. Still, US officials admit that broader issues—such as market access, intellectual property theft, and China’s trade surplus—remain unresolved.
Even so, the deal may stave off immediate disruption. Prior to the talks, US carmakers had warned of production halts due to China’s stranglehold on the global supply of rare earths. Oil markets rose on the news, with Brent crude up 1.8% and West Texas Intermediate gaining 2.2%.
The deal’s political implications are also unfolding. Trump has urged the Federal Reserve to cut interest rates, citing the latest Consumer Price Index reading of 2.4%. “FED SHOULD LOWER ONE FULL POINT,” he posted, arguing it would reduce debt-servicing costs amid trade uncertainty.
For now, investors are left watching and waiting. As Lutnick put it, “Things feel really good”—but whether they’ll stay that way is far from guaranteed.
