US, China reach deal to ease export curbs, keep tariff truce alive

PHONE CALL HELPED

The second round of US-China talks was given a major boost by a rare phone call between Trump and Chinese President Xi Jinping last week, which Lutnick said provided directives that were merged with Geneva truce agreement.

Customs data published on Monday showed that China’s exports to the U.S. plunged 34.5 per cent in May, the sharpest drop since the outbreak of the COVID pandemic.

While the impact on US inflation and its jobs market has so far been muted, tariffs have hammered US business and household confidence and the dollar remains under pressure.

Lutnick was joined by US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent at the London talks. Bessent departed hours before their conclusion to return to Washington to testify before Congress on Wednesday.

China holds a near-monopoly on rare earth magnets, a crucial component in electric vehicle motors, and its decision in April to suspend exports of a wide range of critical minerals and magnets upended global supply chains.

In May, the US responded by halting shipments of semiconductor design software and chemicals and aviation equipment, revoking export licences that had been previously issued.

China, Mexico, the European Union, Japan, Canada and many airlines and aerospace companies worldwide urged the Trump administration not to impose new national security tariffs on imported commercial planes and parts, according to documents released on Tuesday.

Just after the framework deal was announced, a US appeals court allowed Trump’s most sweeping tariffs to stay in effect while it reviews a lower court decision blocking them on grounds that they exceeded Trump’s legal authority by imposing them.

The decision keeps alive a key pressure point on China, Trump’s currently suspended 34 per cent “reciprocal” duties that had prompted swift tariff escalation.