Breaking: USA and China Agree on Temporary Trade Truce
U.S. and China reach tentative accord in their trade dispute negotiations. - U.S. and China broker initial trade dispute compromise
Let's dive into the latest development in the global trade scene! China and the United States have recently reached a preliminary agreement in their high-stakes trade dispute. This fascinating piece of news was shared by China's chief trade negotiator, Li Chenggang, via the official news agency Xinhua.
Similarly, US Trade Minister Howard Lutnick also confirmed a framework agreement to implement the previous consensus reached during the Geneva talks. Both delegations are now preparing to present the results of their London meeting to their respective heads of state for approval.
The Heads Hold the Power
If President Donald Trump and Chinese President Xi Jinping agree, the deal will come into action. Initial details about the agreement's contents are currently scarce.
Li Chenggang praised the professionalism, sincerity, and rationality of the two-day talks, hoping that the progress achieved in London would bolster trust between China and the United States.
Escalation Averted?
This development suggests a path towards de-escalation in the tense trade relations between the world's two largest economies. Since mid-May, a 90-day truce has been in effect, halting the escalating trade war. During their Geneva meeting, the nations agreed to drastically cut tariffs on imports from each other, and to negotiate during the truce period.
The London meeting focused primarily on export restrictions. In April, China tightened its export of crucial rare earths, while the U.S. has restricted exports of certain chip design software and aircraft components to China. The next round of negotiations’ dates and location are yet to be announced.
Tariff and Export Insights
- The preliminary agreement slashes tariffs by 115% initially, creating a baseline tariff of 30% for Chinese goods. This includes a 20% tariff linked to alleged fentanyl trafficking and a 10% reciprocal tariff.
- Without an agreement by August 14, 2025, the 10% reciprocal tariff will rise to 34%, raising the total baseline tariff to 54%.
- Prior to this agreement, the U.S. imposed a cumulative tariff of approximately 55% on Chinese imports, consisting of a 25% tariff from 2018, a 10% tariff in April, and a 20% tariff in February.
- The deal restores the flow of important rare earth minerals from China, addressing U.S. supply line concerns.
- The agreement preserves exclusions on certain products, like semiconductor devices, critical minerals, steel and aluminum products impacted by Section 232 tariffs, automobiles, and auto parts, from the reciprocal tariffs.
- Education-wise, the U.S. has agreed to lift restrictions on Chinese students studying in American universities.
- The agreement lowers the de minimis rate on low-value imports from 120% to 54%, or $100 per postal item.
- The cooperation policy between EC countries could potentially benefit from the temporary trade truce agreed upon by the USA and China, as it may foster a more stable business environment for industries relying on trade with these nations.
- In the realm of finance, this trade truce may positively influence the flow of investments between the USA and China, potentially strengthening the financial sector and promoting economic growth in both countries.
- Politically, the temporary trade truce between the USA and China could lead to increased cooperation on other policies and issues, as improved relations may create a more conducive environment for dialogue and negotiation on general-news matters.
