U.S. President Donald Trump and Chinese leader Xi Jinping have reached a moment of détente in their monthslong trade battle. An agreement hashed out in London last week allowed each side to claim some wins, but left unresolved a tangle of continued trade disputes between the two economic superpowers.
“Our deal with China is done, subject to final approval from President Xi and me,” President Trump wrote in all caps on his media platform Truth Social.
The United States will impose a 55% tariff on Chinese goods, while China will levy 10% tariffs on U.S. goods, according to Mr. Trump’s post. The U.S. will also walk back threats to bar Chinese students from its universities and relax recent restrictions on exporting certain products and technologies to China, like jet engines for Chinese-made planes. China, meanwhile, will ease restrictions on exports of certain magnets and rare earth minerals for six months.
Why We Wrote This
The world’s two largest economies are trying to tamp down escalating tariffs and export controls. The latest agreement offers a reset in the relationship, yet challenges remain.
The agreed-upon U.S. tariff rate is virtually the same one it imposed on April 2 when Mr. Trump announced his plans for widespread tariffs. That rate is significantly higher than before Mr. Trump took office. And uncertainty still surrounds the tariff rates for most other countries.
“The critical minerals agreement is welcome,” says Rebecca Patterson, a senior fellow at the Council on Foreign Relations. “But we’re not out of the woods on supply chain worries and the stagflationary impact that could have on the economy.”
The agreement is not set in stone. Both countries referred to it as a “framework.” Some key details around whether China will permit exports of rare earths needed for the U.S. military – and whether the U.S. will still limit advanced artificial intelligence chips – remain unresolved, Reuters recently reported.
China and the U.S. have been levying tariffs on each other since February, when Mr. Trump set a 10% tariff on Chinese imports, saying it was because of its role in fentanyl production. China was the only country that immediately retaliated against Mr. Trump’s April 2 tariffs, and the countries continued to escalate until U.S. tariffs on China were as high as 145%. After trade talks in Geneva in May, the countries agreed to a 90-day pause on the highest tariffs.
But relations began to sour again after Washington complained that Beijing was slow-rolling exports to the U.S. of critical rare earth minerals and magnets. As a result, the U.S. restricted exports of certain technologies and products to China, and threatened to ban Chinese students from U.S. universities. Mr. Trump and Mr. Xi eventually held a long-anticipated phone call on June 5, which paved the way for two days of intense negotiations in London between top economic advisers from each country.
Economic impact of the agreement
Dr. Raymond Robertson, a professor of economics and government at Texas A&M University, hopes the agreement will bring some stability to U.S.-China relations. But he believes the tariff rate remains high enough to inflict economic damage on Americans.
“There’s nothing specific in this deal that we know of so far that indicates that consumers are going to get a break,” says Dr. Robertson. “Every house in America has things from China. So having a 55% tariff is still going to bite consumers.”
Since Mr. Trump imposed his tariffs in April, economic experts on both sides of the political aisle have criticized them for raising prices and harming U.S. manufacturers. A May survey by the Federal Reserve found that higher tariff rates were putting upward pressure on costs and prices, and that companies that plan to pass along tariff-related costs expect to do so within three months.
Tariffs on China can be especially impactful because of the sheer quantity of what China exports to the U.S. Many technologies and products sold in the U.S. contain at least one component that’s produced in China. China has also been adept at dominating supply chains from beginning to end.
“If there’s 10 things that you need to do to produce a good shirt at a low cost, some countries are good at four or five of those 10 things,” says Dr. Robertson. “China’s good at all 10.”
China also processes around 90% of the world’s rare earth supply. Many U.S. industries, including the military, depend on these materials. The auto industry is particularly reliant on Chinese rare earth magnets for car parts like engines and brakes.
How this affects ongoing trade negotiations
Some observers note that the way Mr. Trump has negotiated with China seems to differ from how he’s communicated with other countries.
Mr. Trump is coming up against a deadline to enter into trade deals with 90 countries after pausing tariffs for 90 days until July 8. So far, he has only come to agreements with China and the United Kingdom.
Negotiations with some 18 major trade partners are ongoing, Treasury Secretary Scott Bessent told lawmakers last week. He noted the administration was “highly likely” to push back the deadline for trade deals if countries were negotiating in good faith. Mr. Trump later agreed he was willing to extend the deadline, although he noted he didn’t think it would be necessary.
On June 11, the president said he would start sending out letters in a week or two to dozens of other countries outlining their country-specific tariff rates ahead of the July deadline. “At a certain point, we’re just going to send letters out … saying, ‘This is the deal. You can take it, or you can leave it.’”
That more hands-off approach contrasts with how closely he’s negotiated with China in recent months, with his team spending days in in-person discussions. But the 55% tariff on China is also higher than most of the tariffs against other countries.
A Trump official says the 55% number reflects 30% in tariffs that Mr. Trump had recently imposed on China, as well as 25% that Mr. Trump had put in place during his first term. President Trump’s aggressive position on trade with China stems from a long-held belief that China unfairly takes advantage of trade with the U.S.
Although the details of the negotiation are specific to China, this agreement may still set a standard for how the U.S.’s other trading partners negotiate with Mr. Trump.
“Other countries are paying very, very close attention,” says Dr. Robertson. “Because they’re all trying to figure out, ‘What do I have to give up in order to get lower tariffs?’”
Mr. Trump has shown consistency with a high-level strategy to get other countries to invest more in the U.S., Ms. Patterson says. But she believes pushback the administration received from U.S. businesses after the first major round of tariffs has made the White House more willing to pause before going forward with decisions about tariffs.
“The bigger picture goal hasn’t changed,” says Ms. Patterson. “The administration is just mindful that the American public and American corporate sector will only endure so much pain along the way towards the White House’s goals.”
