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Large economic powers China and the USA have momentarily halted their trade dispute truce. Another round of negotiations is scheduled to address the ongoing trade disagreements. The crux of their discord revolves around various trade-related issues.

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A temporary ceasefire in the tariff disagreement between China and the United States has been...
A temporary ceasefire in the tariff disagreement between China and the United States has been established. Future negotiations seek to mitigate trade friction. The primary points of contention between these economic giants remain undisclosed.

Firm Handshake During Encounter

Updating the Tariff Conundrum: US-China Trade Talks

The trade dance between the US and China is heating up again, with both nations inching closer to a resolution in their tariff spat. The negotiators from both sides recently held talks in London, as per Chinese state media, with Kevin Hassett, Donald Trump's economic advisor, anticipating a swift breakthrough.

The focus of these discussions is steering away from mutual tariffs and towards China's export restrictions on rare earths, essential raw materials for high-tech industries. The objective is to reach a fundamental agreement on this issue, with Hassett stating that the US government expects China to ease these restrictions swiftly following an agreement. In return, the US would also relax its export controls.

The economic impact of this dispute is already showing, as China's customs data reveals a significant drop in trade between the world's largest economies in May.

The Players and Topics

It's unclear if the London talks will extend into Tuesday, with China represented by Vice-Premier He Lifeng, and US Treasury Secretary Scott Bessent expected to join the US delegation, as previously announced by Trump. Although Trump claims the talks are about the details of their joint trade agreement, it's likely that export controls on raw materials by China and restrictions on the sale of crucial technology to China by the US will be the main topics.

In the past month, both countries have experienced a steep decrease in their exports and imports when trading with each other, according to Chinese authorities in Beijing. However, China has managed to increase its exports to other regions such as Germany, despite the decline in trade with the US.

The Dispute's History

The US and China last held talks since the escalation of the trade dispute in Geneva in mid-May. At that time, both sides agreed to significantly reduce their tariffs for 90 days. In April, US President Trump increased tariffs on goods from China to up to 145%, while China retaliated with tariffs on imports from the US of up to 125% and imposed export controls, including on certain rare earths.

These elements are crucial for industries that rely on electric motors, sensors, and other high-tech products. China controls about 85-95% of the global market for these raw materials and special magnet materials, raising concerns among companies worldwide due to the export restrictions.

China could also address the US restrictions on the sale of important technology products to China, given the country's dependence on foreign suppliers for computer chips and critical components in the aerospace industry.

Towards a Phone Call Breakthrough?

Following a phone call between Trump and Chinese President Xi Jinping, expectations have risen for a more comprehensive agreement. Trump's spokesperson, Karoline Leavitt, stated on US television that China must hold up its end of the agreement. Yet, China has expressed caution, urging the US to stick to the terms of their mutual agreements and objectively evaluate the progress made so far.

Economists worldwide are closely watching the development of this trade conflict, as it has the potential to impact the global economy significantly. Trump's hardline trade policy against China has continued since his inauguration, with escalating tensions and unresolved underlying disagreements still lingering.

Trump's Aim: Reducing the Trade Deficit with China

In 2024, government figures showed that the US exported goods worth around $143 billion to China, while imports from there totaled $439 billion, resulting in a trade deficit of nearly $300 billion. Trump has frequently referred to "tariffs" as his favorite word, announcing, threatening, or implementing numerous additional import duties. His efforts include a new 10% tariff on almost all imports, as well as higher tariffs on imports from major trading partners like China and the EU.

Yet, many economists warn that Trump's additional import duties could lead to higher prices and less growth in the US in the long run. The trade relationship between the US and China remains complex, with tensions and negotiations ongoing across various issues such as technology, intellectual property, and agricultural products. Sources:

  1. Reuters - US-China trade talks likely to continue in second day in London: sources
  2. CNBC - U.S.-China trade talks expected to set stage for more comprehensive agreement
  3. BBC News - US-China trade talks: What are rare earths?
  4. CBS News - Fact check: Tariff differences, deficit between US and China
  5. The Diplomat - Rare Earth Dependence, US-China Trade, and Supply Chain Diversification

The ongoing discussions between the US and China in their trade conflict increasingly involve politics and general-news topics, with the focus shifting from tariffs to China's export restrictions on rare earths, essential for high-tech industries. It is anticipated that both nations, represented by Vice-Premier He Lifeng and US Treasury Secretary Scott Bessent, will discuss these restrictions and the US restrictions on the sale of technology products during their talks, which are expected to continue into Tuesday.

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