Agreement Reached: U.S.A and China on Essential Terms - Aggreement in Principle Reached: America and China Settle Trade Dispute
Without disclosing the complete details, representatives from Washington and Beijing have hinted at a breakthrough in their trade conflicts. Finance mogul Howard Lutnick remains hopeful that issues concerning rare earths will be resolved through the implementation of this broad framework. With China being the primary supplier of these critical materials, crucial for various technologies, they had imposed export restrictions during the ongoing trade dispute with U.S. President Donald Trump.
On the other side, the U.S. is expected to loosen export controls on advanced computer chips and related technologies, which China is eager to see. The primary objective of the discussions in London was to cement the initial tariff reductions agreed upon provisionally in Geneva last month.
Since Trump assumed office in 2017, the trade war between the world's two major economies has intensified. In response to Trump's stringent trade policies towards U.S. trade partners, China implemented its own tariffs, causing Trump to impose further tariffs. Eventually, tariffs of 145% were imposed on Chinese exports to U.S., while 125% were imposed in the opposite direction.
In mid-May, the two countries, at the Geneva talks, agreed to substantially lower initial tariffs for a temporary period of 90 days to facilitate negotiations. "We're racing against time", said US Trade Representative Jamieson Greer, who was also part of the London discussion. "We're excited to collaborate with the Chinese."
China's Trade Representative Li praised the "extremely professional, rational, thorough, and open" engagement with U.S. delegates. He expressed optimism that this progress would strengthen trust between the two nations.
Trump had previously voiced skepticism about the possibility of reaching a satisfactory agreement after accusing the Beijing leadership of failing to adhere to the deal struck in Geneva. However, after a phone call with Chinese President Xi Jinping last week, Trump expressed a more positive outlook.
The latest development has brought a sense of relief to markets, particularly in Hong Kong and Shanghai, where stock prices have soared. However, analysts warn that no concrete details regarding the points of agreement have been divulged yet. As of now, all Washington and Beijing have done is reaffirm their commitment from the Geneva agreement in May.
If substantial progress isn't made soon, such as ships carrying rare earths or actual tariff reductions, the market sentiments might change quickly, said Stephen Innes of SPI Asset Management. In the meantime, the rising stock prices mainly reflect positive sentiments.
The impact of the trade war is evident: according to data released by Beijing, Chinese exports to the U.S. plunged by 12.7% in May compared to April. As the Chinese government works towards repairing its relationship with Washington, it is also engaging in talks with other nations to create a united front against the U.S.
- China
- USA
- Tariff Reductions
- Framework Agreement
- Donald Trump
- Trade Conflict
- Howard Lutnick
- Peking
- Geneva
- Stock Prices
- High-Performance Computer Chips
- Rare Earths
- Trade Disputes
- Hong Kong
- Shanghai
Additional Insights
- The exact content of the agreement remains uncertain as the details have not been disclosed. The framework agreement still needs final approval from presidents Trump and Xi Jinping.
- The agreed upon tariffs will be 55% for the U.S. and 10% for China. However, specific tariff adjustments or reductions have not been mentioned in the available information.
- China has agreed to issue export licenses for rare earths based on their "reasonable needs" with compliant applications already approved. The U.S. is expected to receive full magnets and necessary rare earths from China.
- The agreement is considered a "handshake for a framework", suggesting that although a preliminary consensus has been reached, significant steps remain for the formalization and implementation of the agreement.
- The framework agreement between the USA and China, yet to be approved by presidents Trump and Xi Jinping, includes a pledge by China to issue export licenses for rare earths based on their "reasonable needs" with compliant applications already approved.
- The employment policy of EC countries, in the face of ongoing trade conflicts between the USA and China, may be impacted as the agreement could lead to reduced tariffs on high-performance computer chips, critical for various technologies.
