U.S.-China Trade Talks: A Moving Target
U.S. and EU move into trade agreement negotiation phase.
In the bustling city of London, U.S. and Chinese officials have lock horns in high-stakes negotiations, inching closer to a potential resolution.
After two intense days of talks, both sides announced they had reached a preliminary agreement, particularly on easing export controls, such as those on rare earths from China. The presidents of both countries will now decide on the framework agreement. There's been some progress on the core issue of U.S. tariffs, according to the U.S. account.
A deal was struck late Tuesday night, with U.S. Trade Representative Howard Lutnick telling reporters that it would lead to minerals and magnets made from rare earths coming back to the U.S. President Donald Trump also tweeted about the deal, saying it was done, and that the U.S. would allow Chinese students to access American universities.
The temporary truce offers a glimmer of hope that the ceasefire in the trade war, agreed in May, will hold. The U.S. has repeatedly accused China of using export controls to restrict the supply of rare earths, on which many countries and industries are heavily dependent. They are used, for example, in electric cars.
Lutnick, reflecting on the talks between the two countries in May in Geneva, said the current understanding was "meat on the bone." In Switzerland in mid-May, a 90-day truce and significantly lower tariffs were agreed. Before that, tariffs had spiraled up to well over 100 percent - a level that would severely damage trade between the two largest economies. A U.S. government official said the deal allows the U.S. to impose a 55 percent tariff on Chinese imports, with China imposing a 10 percent tariff on U.S. goods in return.
Lutnick also said some of the U.S. export controls that had been imposed would be lifted, but he did not provide details. Now, Trump and his Chinese counterpart Xi Jinping will have to decide. If they give the green light, the framework agreement will be implemented. Trump's economic advisor Kevin Hassett had said on Monday that the U.S. could ease export controls on semiconductors in return.
CHINA: MORE AGREEMENT NEEDED
Chinese Vice Premier He Lifeng described the negotiations at the grand Lancaster House near Buckingham Palace as thorough and open. The U.S. and China should expand their agreement and keep communication channels open, He was quoted as saying by the state news agency Xinhua. Both sides should strive for stable and long-term economic relations.
Despite the progress, investors at the Frankfurt stock exchange remained cautious. The DAX was up just 0.2 percent at 24,033 points. Investors described the agreement as vague. "Chips for rare earths could be the formula for solving this conflict," said equity expert Jürgen Molnar of RoboMarkets.
A spokesperson for Germany's Economics Ministry in Berlin said the government had taken note of the agreement reached overnight. Germany supports the European Commission in its negotiations with the U.S.
China is primarily concerned with the special tariffs imposed by Trump. The USA criticizes the high state subsidies for Chinese industries, which then flood the world markets with cheap products. Both sides have until August 10 to find further compromises. Otherwise, tariffs will rise again - to 145 percent on the US side and 125 percent on the Chinese side.
WORLD BANK PESSIMISTIC
The World Bank has recently significantly lowered its growth forecast for the global economy. Due to higher tariffs and greater uncertainty, the world economy is expected to grow by only 2.3 percent in 2025, 0.4 points less than previously expected. Experts believe that the USA, as the initiator of the trade dispute, will have to reckon with higher inflation and less growth. Trump is also at loggerheads with the European Union. Negotiations are supposed to bring a breakthrough by early July.
CRITICISM FROM THE EU AND WORLD BANK
The President of the European Central Bank, Christine Lagarde, expressed basic criticism: Financial imbalances cannot be corrected with trade policy coercive measures. The risk of mutual harm is so great that all sides must weigh mutual adjustments to resolve the tensions, the Frenchwoman explained during a visit to Beijing on Wednesday. "We have observed a strong increase in the use of industrial policy measures to promote domestic capacities," said Lagarde. "Since 2014, subsidy-induced interventions that distort global trade have more than tripled worldwide."
- The progress in U.S.-China trade talks, though promising, has raised concerns in the finance sector, particularly among investors.
- As the U.S. and China seek to finalize a trade agreement, policy-and-legislation and politics continue to play significant roles.
- The war-and-conflicts between the two economic giants have been a key point of discussion, with both sides accusing each other of unfair trade practices.
- In addition to the U.S.-China trade talks, the general-news also highlights the World Bank's pessimistic outlook on the global economy, which has been affected by higher tariffs and increased uncertainty.
- Amidst these developments, countries like Germany are closely following the negotiations, supporting the European Commission in its efforts to find compromises and maintain stable economic relations with all parties involved.
