US President Donald Trump announced today that the United States and China have reached a framework agreement after two days of negotiations in London, which includes, among other things, the supply of rare earths from Beijing and the lifting of restrictions on Chinese students at American universities.<\/p>\n\n\n\n
The agreement calls for the imposition of 55% tariffs by the US on Chinese products, while China will apply 10% tariffs on American imports. According to White House officials, the 55% tariffs result from the 10% countervailing duties, 20% tariffs to combat the trafficking of fentanyl and pre-existing 25% tariffs.<\/p>\n\n\n\n
This is a significant change from the 30% U.S. tariffs on most Chinese goods that were in place after the Geneva deal, which in turn was reduced from a high of 145%. Chinese tariffs were 10% after Geneva, down from 125%. Commerce Secretary Howard Lutnick said that U.S. tariffs on imports from China would not change from their current levels.<\/p>\n\n\n\n
The Chinese government\u2019s statements on the talks were more subdued, with state media reporting that the delegations \u201cmade new progress,\u201d but without providing specific details on the terms of the agreement. Vice Commerce Minister Li Zhenggang confirmed that an agreement in principle had been reached on a framework, without providing further details.<\/p>\n\n\n\n
The deal for\u2026 a deal<\/strong><\/p>\n\n\n\n Trump said on social media that \u201cour deal with China is complete\u201d and that it was \u201csubject to final approval by President Xi and me.\u201d The framework aims to de-escalate trade tensions that arose after the preliminary agreement in Geneva.<\/p>\n\n\n\n A central element of the agreement is China\u2019s commitment to supply \u201cmagnets and essential rare earths\u201d to the United States. China has a near monopoly on these materials, which are vital to the automotive, aerospace, electronics and defense industries. The previous ban on these exports had caused significant disruptions to American industry.<\/p>\n\n\n\n At the same time, the US will allow Chinese students to study at American universities, reversing previous considerations to limit the presence of Chinese nationals, including possible visa revocations for students in \u201ccritical sectors\u201d or with alleged ties to the Chinese Communist Party.<\/p>\n\n\n\n Trump also said that he and President Xi would \u201cwork closely to open China to American trade,\u201d calling it a \u201cbig WIN for both countries!!!\u201d.<\/p>\n\n\n\n Doubts Remain<\/strong><\/p>\n\n\n\n The markets reacted very lukewarmly to the news of the agreement, which is explained by two reasons. First, traders had discounted a positive outcome in the talks and secondly, the agreement has not been finalized and many details still remain to be verified. The US government has made a multitude of statements in recent weeks about many trade agreements that are coming, but so far the only agreement that has been signed is the one with the United Kingdom.<\/p>\n\n\n\n Part of the rhetoric is also explained as an attempt to give some breathing space to the markets after the great volatility caused by the switching of tariff policies on an almost daily basis, a policy that seems to stem from less “hot-headed” people within the US government such as Treasury Secretary Scott Besant.<\/p>\n\n\n\n Analysts express cautious optimism about the new agreement. The reason is that we have seen a relatively subdued reaction to the news of a deal with China, and to me that signals indifference. They agreed to continue the talks and create a framework for future discussions, but nothing particularly significant has really been resolved.<\/p>\n\n\n\n There is a contradiction between Trump\u2019s statement of a \u201cdone deal\u201d and the reality of a framework for further discussions. We have not yet seen the details, which is why I think the market is not reacting yet.<\/p>\n\n\n\n How not to threaten China?<\/strong><\/p>\n\n\n\n But there is something else to take from the events of the last few days. The Trump administration\u2019s recent decision to require export licenses for ethane shipments to China also revealed contradictions in its tariff policy, as noted by CSIS. On June 3, the Bureau of Industry and Security issued a notice of denial of licenses for three ethane shipments from Enterprise Products Partners, blocking billions of dollars in exports.<\/p>\n\n\n\n But ethane export controls are more damaging to American companies than to Chinese competitors, and they also erode U.S. credibility at a time when countries are reluctant to move closer to China. China imported 227,000 barrels of ethane per day from the United States in 2024, but that represents only 8-10% of the country\u2019s total ethylene feedstock.<\/p>\n\n\n\n China\u2019s petrochemical infrastructure is designed to handle such supply disruptions. Newer furnaces use flexible technology that can switch between gas and liquid feedstocks. When ethane supplies are cut, Chinese plants do not shut down but switch to naphtha, maintaining production almost uninterrupted, albeit at a higher cost.<\/p>\n\n\n\n China\u2019s decision in April to halt exports of some rare earths was a much more surgical move and concludes that Beijing was the early \u201cwinner\u201d in the showdown between the two countries, calling for a different strategy from the US in the future.<\/p>\n","protected":false},"excerpt":{"rendered":" US President Donald Trump announced today that the United States and China have reached a framework agreement after two days of negotiations in London,…<\/p>\n","protected":false},"author":1,"featured_media":24683,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[821,390,819],"tags":[161,655,46,70,2187],"class_list":["post-24682","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-asia","category-politics","category-usa","tag-china","tag-donald-trump","tag-tariffs","tag-usa","tag-xi-jinping"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/24682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=24682"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/24682\/revisions"}],"predecessor-version":[{"id":24684,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/24682\/revisions\/24684"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/media\/24683"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}