As a result of two days of closed-door negotiations that concluded late Tuesday in London, representatives from the U.S. and China finally agreed on a minimalist trade agreement aimed at slightly easing tensions and postponing planned significant tariff increases.
This compromise implies the lifting of some restrictions on the export of rare earth metals from China and the cancellation of some recent American export bans. However, it does not provide a real solution to the protracted conflict between the two economic giants — the trade war continues to drag both economies downhill.
The meeting, which lasted until late at night, was the first serious move forward after the failed Geneva agreement a month ago. Back then, everything fell through because China was unwilling to lift bans on critically important minerals.
In response, the Trump administration imposed new export restrictions — halting shipments from the U.S. of software for chips, aviation equipment, and advanced chemicals.
The situation with rare earth metals has become a bit clearer — Chinese companies have received new export licenses. This was reported by several players listed in Shenzhen, including JL MAG Rare-Earth, Innuovo Technology, and Beijing Zhong Ke San Huan.
But one should not be mistaken — this memorandum does not remove the root problems. The United States still considers the Chinese economy excessively state-regulated and unfair. Trump’s team has not budged an inch from its accusations against Beijing for trade manipulation through subsidies and closed rules.
On the other hand, China is emphasizing the illegality and recklessness of American unilateral tariffs in response. So, the current compromise is essentially just a temporary breather to avoid a complete collapse while both sides play the waiting game.
And time is short — August 10, 2025, stands as a hard deadline for a more comprehensive agreement. If no deal is reached, tariffs will surge upward with renewed force: American tariffs will jump from 30% to 145%, and Chinese tariffs will rise from 10% to 125%.
The consequences are already palpable. China's exports to the U.S. fell by 34.5% in May — the sharpest decline since the COVID lockdowns. The data came directly from Chinese customs on Monday. Meanwhile, inflation in the U.S. remains under control, but business sentiment is deteriorating, and the dollar is losing ground.
The World Bank is also sounding the alarm: on Tuesday, it lowered its forecast for global growth in 2025 by 0.4 percentage points — now only 2.3%. The warning clearly states that rising tariffs and ongoing trade skirmishes are dragging down almost all key economies.
Christine Lagarde, the head of the European Central Bank, visited Beijing last week and noted that the trade war threatens not only bilateral relations.
"Serious political adjustments are needed from all sides to resolve the conflict; otherwise, they risk causing serious harm to each other," she stated.
To prevent a new spike in tariffs, the governments of Mexico, Japan, Canada, the European Union, as well as major airlines and aerospace corporations filed official complaints to the Trump administration, asking not to impose national tariffs on commercial aircraft components for national security reasons. So far, there has been silence from the White House.
Nevertheless, Trump is set to play hard. Immediately after the announcement of the agreement, a U.S. appeals court gave him the green light to keep one of the toughest tariffs — a 34% reciprocal tariff — in place while a lower court considers the case for cancellation. This move allows Trump to maintain a powerful lever of pressure on China despite the temporary pause in tariff enforcement.
