Last week, the United States and China reached a new trade agreement framework following intense negotiations aimed at de-escalating the ongoing trade conflict between the two largest global economies. This development, announced Wednesday, after talks in London, built on a prior consensus from Geneva in May 2025. The deal represents a partial rollback of the severe tariffs that had been imposed earlier this year, though it falls short of a comprehensive resolution.
Last week’s agreement emerged after a period of heightened tensions marked by reciprocal tariffs that reached unprecedented levels—up to 145% on many Chinese imports into the U.S.—and export restrictions that severely disrupted trade flows. The initial breakthrough came in May, when both countries agreed to reduce tariffs significantly for a 90-day period: the U.S. lowered its tariffs on Chinese goods from 145% to 30%, while China cut its tariffs on American products from 125% to 10%. This temporary truce was intended to create a window for more detailed negotiations toward a durable trade deal.
The recent London talks sought to solidify the framework for implementing the Geneva agreement. Both sides agreed on key issues such as easing export controls, particularly on rare earth minerals and magnets, which are critical for high-tech manufacturing and have been a major point of contention. China committed to gradually lifting restrictions on these materials, while the U.S. agreed to reduce some export limitations on advanced technologies, though significant restrictions remain, especially concerning AI chips and semiconductor technology.
Despite these advances, the trade deal is widely viewed as a return to the status quo before the tariff escalation in April rather than a full resolution. Tariff levels remain historically high on both sides, and many export controls continue to be enforced. The U.S. has not relaxed restrictions on Chinese automobile imports, nor is it expected to allow the sale of advanced AI chips to China in the near term. President Trump himself acknowledged that China is not treating the U.S. any more fairly under this agreement than before.
The trade tensions have had significant economic impacts. The tariffs have raised costs for American businesses and consumers, disrupted supply chains, and contributed to economic uncertainty. The trade war also contributed to a slowdown in U.S. GDP growth and a decline in Chinese exports to the U.S., affecting manufacturing sectors in both countries.
The deal’s durability remains uncertain. Since the Geneva agreement, both sides have accused each other of failing to meet commitments. The U.S. criticized China for slow progress on rare earth exports, while China accused the U.S. of violating terms by restricting technology sales and tightening visa policies for Chinese students. These mutual accusations have maintained a confrontational tone despite the framework agreement.
Overall, the new U.S.-China trade framework represents a necessary but fragile truce that reduces some tariffs and addresses key export restrictions, particularly on rare earth minerals. However, it largely preserves the elevated tariff environment and export controls established earlier in the year. While it brings temporary relief to markets and businesses, the agreement stops short of resolving deeper trade disputes, leaving the future of U.S.-China economic relations uncertain and subject to further negotiation and potential conflict.
More information is available here.
Image: Pexels.com
You must be logged in to post a comment.