In June 2025, the United States and China reached a preliminary trade deal framework following two days of intensive talks in London, building on a prior agreement from Geneva in May 2025. The framework aims to de-escalate trade tensions by addressing tariff reductions and export restrictions, pending approval from Presidents Donald Trump and Xi Jinping.
The U.S. agreed to maintain 55% tariffs on Chinese goods (including existing tariffs from Trump’s first term), while China will keep 10% tariffs on U.S. imports, as per the Geneva consensus. This follows a temporary rollback in May from 145% U.S. tariffs and 125% Chinese tariffs to 30% and 10%, respectively, for a 90-day negotiation period.
Rare Earths and Magnets: China committed to resolving export restrictions on rare earth minerals and magnets, critical for U.S. industries like automotive, defense, and electronics. In return, the U.S. will ease certain countermeasures, though specifics remain unclear.
The framework includes provisions for the U.S. to allow Chinese students access to American universities, reversing prior restrictions. China seeks eased U.S. controls on semiconductor and AI-related technology, but the U.S. clarified there’s no direct exchange of high-end AI chip access for rare earths. The talks, led by U.S. Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent, and Chinese Vice Premier He Lifeng, followed mutual accusations of violating the Geneva deal.
China’s exports to the U.S. dropped 34.5% in May, and rare earth restrictions threatened global supply chains, prompting urgency. Markets showed muted responses due to the deal’s preliminary nature and lack of detailed terms. Analysts, like Wendy Cutler of the Asia Society, expressed concern that the U.S. may have compromised by negotiating national security-related export controls, potentially weakening its stance. Others, like Deutsche Bank, noted historical patterns of progress stalling post-talks.
The preliminary U.S.-China trade deal framework announced in June 2025 carries significant implications across economic, geopolitical, and industrial domains. The framework aims to prevent a return to high tariffs (145% U.S., 125% China) post the July 9, 2025, deadline, potentially stabilizing bilateral trade flows. This could mitigate the 34.5% drop in Chinese exports to the U.S. seen in May 2025, supporting global supply chains.
Lower tariffs (55% U.S., 10% China) compared to earlier peaks could reduce costs for businesses and consumers, though still higher than pre-escalation levels, limiting full recovery. Muted market responses reflect skepticism about the deal’s durability, given the lack of detailed terms and historical failures to finalize agreements. Volatility in sectors like technology, automotive, and manufacturing may persist until a final deal is confirmed.
Businesses reliant on U.S.-China trade face continued uncertainty, as unresolved issues like China’s trade surplus and subsidies could derail progress. Easing China’s restrictions on rare earth minerals and magnets could stabilize supply chains for industries like electronics, electric vehicles, and defense, where China controls 70-90% of global supply. This reduces risks of shortages and price spikes.
However, incomplete resolution of technology export controls (e.g., semiconductors, AI chips) may limit benefits for U.S. tech firms seeking access to Chinese markets. The framework signals a mutual interest in avoiding a full-blown trade war, potentially cooling U.S.-China relations strained by prior tariff escalations and export bans. This aligns with Presidents Trump and Xi’s reported desire for a workable deal.
Cooperation on student visas suggests a softening of cultural and educational barriers, though this may face domestic pushback in the U.S. over security concerns. Critics, like Wendy Cutler, warn that U.S. concessions on export controls tied to national security (e.g., semiconductors, AI technology) could weaken its strategic position. China’s push for access to advanced tech remains a flashpoint, as the U.S. insists no direct trade-off with rare earths.
The deal’s focus on rare earths highlights China’s leverage over critical minerals, potentially pressuring the U.S. to diversify supply chains with allies like Australia or Canada. A stabilized U.S.-China trade relationship could reduce global economic fragmentation, benefiting allies reliant on both markets. However, failure to finalize the deal risks reinforcing perceptions of U.S.-China decoupling, encouraging other nations to align with one side.
U.S. tech firms may see limited relief if export controls on semiconductors and AI remain stringent. China’s push for access to these technologies suggests ongoing friction, as the U.S. prioritizes national security. Increased access for Chinese students to U.S. universities could boost talent pipelines for tech innovation but raises concerns about intellectual property risks.
Eased rare earth restrictions benefit U.S. manufacturers of electric vehicles, wind turbines, and defense equipment, reducing dependence on volatile Chinese supplies. However, long-term reliance on China persists without alternative sourcing. Lower tariffs could reduce prices for U.S. consumers on Chinese-made goods (e.g., electronics, clothing), though elevated tariffs (55%) still increase costs compared to pre-trade war levels. Chinese consumers may see marginal benefits from 10% U.S. tariffs.
The preliminary nature of the deal and historical breakdowns (e.g., post-Geneva) suggest a high risk of failure. Both sides face domestic pressures—Trump’s base demands tough China policies, while Xi navigates economic slowdown and export reliance. Unresolved issues like subsidies, intellectual property theft, and trade imbalances could stall final negotiations.
In the U.S., critics may argue the deal compromises national security or fails to address China’s market distortions. In China, nationalist sentiments could oppose concessions to the U.S., especially on technology access. A finalized deal could boost global growth by stabilizing trade, but failure risks renewed tariff hikes, disrupting markets and supply chains. Emerging economies reliant on U.S.-China trade (e.g., Southeast Asia) are particularly vulnerable.
A finalized deal by July 2025 could lay the groundwork for sustained trade cooperation, boosting global economic confidence and securing critical supply chains. It may also encourage broader U.S.-China dialogue on climate, technology, or security. If talks collapse, escalating tariffs and restrictions could deepen economic decoupling, increase costs, and accelerate U.S. efforts to “reshore” or diversify supply chains, potentially at higher costs.
The deal underscores the need for the U.S. to invest in domestic rare earth production and tech innovation to reduce reliance on China, while China may accelerate efforts to develop its own advanced technologies. The framework offers a chance to stabilize U.S.-China trade but hinges on resolving complex issues under tight deadlines. Its success or failure will shape global economic and geopolitical dynamics, with significant stakes for industries, consumers, and strategic interests.
