Senior US and Chinese officials have held trade negotiations in London for a second day, trying to make a breakthrough on export restrictions on strategic items like rare earth minerals. The negotiations follow a preliminary agreement last month in Geneva that temporarily eased tensions but did not address main issues.
With Chinese exports to the US having dropped by 34.5% in May and with concerns growing over supply chain shocks globally, both nations now stand in increasing pressure to prevent a fresh economic downturn. The talks are very important, particularly after President Donald Trump stated that Chinese President Xi Jinping had promised to restart rare earth shipments to the US.
Rare Earths Steal the Limelight
The limelight in London is squarely on rare earths. These minerals energize industries such as electric cars, aerospace, and semiconductors. China has a virtual monopoly on rare earth magnets, and its recent curbs on exporting them are extremely dislocating. Plants all over the world now worry about shortages.
US Commerce Secretary Howard Lutnick’s attendance in the negotiations reflects the urgency. His department manages US export policies and did not take part in the Geneva negotiations. His inclusion indicates that rare earths are becoming a focal point of US-China trade tensions.
Fallout From Trump’s Tariff Policies
The crisis comes after years of unpredictable tariff actions by President Trump. Triple-digit tariffs, port congestion, and increased expenses have pained businesses around the world. While a 90-day tariff reversal agreement was reached in Geneva, there are still areas of disagreement.
Monday’s Lancaster House meeting addressed those points of contention. The negotiations will go through Tuesday before both sides are due to release formal statements.
Investor Concerns and Economic Perils
Investors had greeted last month’s Geneva agreement warmly. But new US claims that China was blocking key exports soon rekindled market skepticism. While the US economy thus far has managed to steer clear of widespread inflation or jobs losses, pressure is building on the dollar.
In the meantime, the trade data from China reveal an historic plunge in exports to America—the steepest since February 2020, when COVID-19 shut down world trade.
Direct Trump-Xi Call Sets Tone
These recent meetings come on the heels of a pivotal phone call between Xi and Trump— their first since Trump took office on January 20. Following the call, Trump announced China had agreed to restart exports of rare earths.
Reuters also reported China issued temporary export permits to suppliers to top US automakers. But there is still uncertainty. With plants rushing and the clock running out, the stakes in London couldn’t be higher.
