18 Jun 2025
A week after the second round of high-profile trade negotiations between Beijing and Washington, analysts break down what happened before, during and after
With global economic ramifications on the line, those with a vested interest in supply chains and geopolitical stability watched closely and waited as high-ranking officials from the United States and China emerged from last week’s trade talks in London.
Then, the public was told little. In the absence of an official readout from both sides, hope for a bit more clarity has given way to a fog of questions and buzzy speculation about what happened behind those doors.
Was leverage being applied? By whom and in what manner? And what does this perceived stand-off mean, not just for the two economic giants, but for a world desperate for direction?
The silence, some say, hints at tensions, recalibrated power and the fragile balance of global trade, deepening uncertainty about the world’s most consequential economic relationship.
“This round of negotiations could mark a turning point in the US-China trade war,” said Tao Dong, president and chief economist at Springs Capital (Hong Kong), in an op-ed published on Sunday by the New Economist think tank.
China’s hardball tactics around export controls on rare earth elements – the main focus of the closed-door London talks – perhaps caught the US delegation off guard and added a new layer of tension and complication to already fragile discussions, Tao said.
“The dynamic has shifted from unilateral US pressure to a more evenly matched contest – China is no longer on the defensive and is now negotiating from a position of strength. Second, the focus has moved from tariff levels to export controls – tariffs themselves are now secondary; both sides are targeting choke points in each other’s supply chains, which is why commerce ministers, rather than just trade officials, are now at the table,” Tao wrote.
The current state is one of fragile equilibrium
Tao Dong, Springs Capital
Washington has likely come away with a clearer view of China’s leverage – its dominance in key supply chains and its strategic advantage in rare earths, analysts said. And while some deals may be disclosed, any Chinese concessions on rare earth exports could be narrow and conditional, with reciprocal US promises still pending presidential approval.
“The current state is one of fragile equilibrium,” Tao explained, calling it more constructive than past episodes of maximum pressure. “But at the core, structural and strategic divergences remain – these are unlikely to be resolved within the current negotiation framework.”
One week ago, US President Donald Trump said on social media that a deal with China was “done”, pending final approval by himself and President Xi Jinping. Trump said China would supply full magnets and any necessary rare earths “up front”, and that the US agreed to “Chinese students using our colleges and universities”.
And on Thursday, he said he would set unilateral tariff rates with trading partners in the next week or two, and that letters would be sent to them outlining terms of the new deals before July’s deadline.
All of this unfolds against a broader climate of rising global uncertainty, not just in trade, but across politics and society, deepening divisions that continue to weigh on investor confidence.
In the US, domestic tensions are also running high – an estimated 5 million people took to the streets in thousands of cities and towns, protesting what organisers of the No Kings march described as “authoritarianism, billionaire-first politics, and the militarisation of our democracy”.
US holds first major military parade after 34 years to honour army’s 250th anniversary
Israel’s bombardments of Iran since Friday, amid accusations that Tehran is nearing nuclear capability, have raised the spectre of a full-scale regional war, with potential ripple effects on oil prices, supply chains and US foreign policy calculations in an already fragile global economy.
As of Tuesday, no official announcements had been made regarding the June 9-10 talks in London; the two negotiating teams only said that they had agreed “in principle” to a “framework” that each side would bring home for review by their respective leaders.
Some analysts say signs indicate the London talks did not go as smoothly as the ones that took place a month prior in Switzerland and were immediately followed by joint announcements, including details of the result.
The world’s most consequential economic relationship hit a turbulent patch ahead of the London talks, as mutual accusations of breaching the Geneva truce deepened mistrust between Washington and Beijing. Then, an impromptu call between Xi and Trump on June 5 offered a symbolic olive branch but did little to alter the underlying power dynamics that were subsequently at play in London.
Future negotiations are expected to continue, and this round signalled a willingness on both sides to make tactical concessions – trading short-term interests to de-escalate tensions, avoid mutual damage, and prevent market panic, Tao said.
Still, the strategic rivalry between the US and China may extend into other domains, including technology and finance, as other industries may eventually be drawn into the crossfire, he warned.
Both countries probably haven’t played many of their cards – let alone their trump cards, said Xu Tianchen, senior China economist with the Economist Intelligence Unit (EIU), adding that China could still cut off rare earths to the US, and that the US is not letting its best chips go to China.
“If I’m to make a rough guess, I’d say that the US wanted many things from China for nothing, and that didn’t impress China,” Xu said. “Negotiations will 100 per cent continue, taking place every several months. But based on the limited evidence from the London talks, they will be tug-of-wars that are lengthy but struggle to produce meaningful results.”
And while the London talks appear to have yielded little progress, some analyses suggest that they have laid bare the West’s deep reliance on, and vulnerability to, China’s tightening grip on rare earths. The materials, critical in hi-tech industries, from EV batteries to missile systems, are at the heart of the current stand-off and remain a weakness that the US and Europe are only now scrambling to reduce and will take years to rectify.
Regarding the pressing question of how much China will ease its rare earth exports, Arthur Kroeber, founding partner of China-focused economic research consultancy Gavekal Dragonomics, said in a report last week that this is the best bet: “China will reopen to commercial buyers enough for them to satisfy their ongoing need, but not so much that they can stockpile. And [China] may be even stingier with buyers that feed into the US defence supply chain.”
I think those tariffs will be ‘frozen’ permanently – put back into Pandora’s box
Xu Tianchen, Economist Intelligence Unit
Despite the narrow space in which a deal can be made, Washington is now more likely to give up ground on some firmly held positions, even those concerning national security, to get a trade agreement, he added.
“The jousting of recent weeks suggests that China has set its sights on eroding US export controls. This makes sense: China has more to gain from reopening the flows of US technology than it does from expanding the US market opportunities for its hi-tech firms,” he pointed out.
According to a Reuters report quoting people familiar with the matter, the recent US-China trade talks in London failed to resolve key national security-related export restrictions. Beijing has yet to commit to approving exports of certain rare earth magnets critical to US defence systems, while Washington continues to block China’s access to advanced AI chips over military-use concerns.
China and the US are likely withholding specifics to preserve negotiating leverage and manage domestic perceptions, some say. Washington may be avoiding any appearance of concession, given Trump’s hardline stance on trade, while Beijing may prefer to frame any potential deal as a strategic win that buys time, said Zhuang Bo, global macro strategist at Loomis Sayles Investments Asia.
Economic incentives remain strong for both sides to avoid renewed escalation, he pointed out, as “the US is grappling with inflationary pressures and persistent supply-chain vulnerabilities, while China is contending with a sharp decline in exports to the US and domestic economic headwinds, including deflation”.
In this context, there is “a high likelihood of an extension [beyond the August 10 deadline of paused tariffs] if no agreement is finalised”, Zhuang added.
Xu with the EIU also said an extension seems likely because “if they don’t do so, tariffs will immediately go back to levels the US can’t afford”.
“I think those tariffs will be ‘frozen’ permanently – put back into Pandora’s box,” Xu said. “But, of course, that won’t be the end of the tariff story; the US will find other tools contained in decades-old legislation.”
Communist Party mouthpiece People’s Daily said in a commentary on Thursday that the London talks were a step toward solving trade disputes through equal dialogue. The newspaper called for the US to honour its words with actions.
China is positioned to handle the headwinds. The US is not so well-positioned
Victor Gao, Centre for China and Globalisation
Vice-Premier He Lifeng, who led China’s delegation in London, said Beijing was “sincere but also principled”. He urged the two to safeguard the hard-won outcomes of their dialogue and maintain ongoing communication, the state’s Xinhua reported.
Alberto Vettoretti, managing partner of the business consultancy Dezan Shira & Associates, said US officials could extend the tariff pause if the two sides have made genuine progress on key issues, including lifting reciprocal export restrictions, but more time is needed to agree on other areas.
“If trade talks stall entirely, and little to no progress is made, then it’s possible Trump would try to pressure China by raising tariffs again,” he said.
“How Trump acts on July 8, when the 90-day pause on the Liberation Day tariffs is up, and whether the US raises tariffs on countries that haven’t concluded deals with the US, could be a good indicator of how he will act with China in August.”
China’s global export curbs could backfire – preferential treatment for the US risks alienating other partners, he added.
“Third countries will likely push their own agenda and adopt a multipronged approach. Companies from China will continue to expand overseas to curb related risks, so neighbouring countries shall benefit from the current instability,” Vettoretti said.
In terms of dealing with China, Trump’s urgency depends on whether he realises he misplayed his hand – or was misled, said Victor Gao, vice-president of the Centre for China and Globalisation, a Beijing-based think tank, as a prolonged deadlock risks backlash from consumers and US firms long reliant on profitable China ties.
“China is positioned to handle the headwinds. The US is not so well-positioned,” Gao said. “China is willing to wind down its positions to zero.”
So far, Trump has claimed that Chinese imports into the US receive a sum of “55 per cent” tariffs.
Gavekel’s Kroeber said a deal on fentanyl would be low-hanging fruit, but Trump’s trade negotiators may be reluctant to surrender much of their tariff leverage for a side-agreement on drugs.
If Trump truly wants a deal, Kroeber added, he could easily ease chip-export controls via the Bureau of Industry and Security, a single-agency decision. But flashy wins like Chinese factories creating US jobs are more politically rewarding – and require complex reviews by the Committee on Foreign Investment in the US, which includes nine departments, including Defence and Homeland Security.
Either path demands Trump break from years of national-security orthodoxy, and Trump “is still far from making that move”, Kroeber said.
Dan Murphy, executive director at the Mossavar-Rahmani Centre for Business and Government of Harvard Kennedy School, said last week during the Caixin Summer Summit in Hong Kong that the US and China might be missing or not factoring in potential risks and complications while failing to grasp the big picture.
“My concern, and I think it is going to be a core concern that extends to the economy of China and Asia, is that China and the United States are looking [at each other] from farther away, and we are seeing a less nuanced and less complicated picture, and this can lead to miscalculations.”
After heated London talks, where do China-US trade relations stand?
Washington and Beijing have said the negotiations have led to consensus, though Chinese officials have shared fewer details
After two days of closely watched trade talks between the United States and China in London, US President Donald Trump has declared the negotiations have led to a wide-ranging deal to maintain the fragile truce laid out after earlier talks in Geneva.
The agreement, Trump said, would cover numerous points of contention, including shipments of rare earth minerals, student visas and tariffs.
China, meanwhile, has been reticent to comment on the talks’ outcome, with representatives only saying they would submit a report for President Xi Jinping’s approval.
Here, we summarise the latest developments in the ever-changing trade relationship between the world’s two largest economies.
What did Trump say – and not say？
Trump took to his Truth Social platform on Wednesday to share initial details from the intensive discussions in London, stating a US-China accord was “done”.
China will supply the US with magnets and rare earth minerals – items requiring approval for export – while the US will ensure access to US colleges for Chinese students and impose 55 per cent in tariffs to China’s 10 per cent, he said.
However, he did not comment on the status of US export restrictions on computer chips, a significant sticking point in past negotiations.
What did other US officials say?
In an interview with CNBC on Wednesday, US Commerce Secretary Howard Lutnick echoed Trump’s social media post while revealing more details.
He said China will approve exports of magnets with trace amounts of rare earth elements – crucial to auto manufacturing – “right away”, adding the change only applied to US companies. Those firms have submitted thousands of applications to Chinese officials for rare earth exports, Lutnick said, but only 98 were approved.
However, the Wall Street Journal reported on Thursday there will be a six-month limit on licences granted to US firms, citing unnamed sources familiar with the matter. The move would give Beijing leverage if trade tensions flare up again, it said.
Separately, a top Chinese rare earth exporter said on Wednesday it had obtained permits to ship to destinations including the US, Europe and Southeast Asia.
In return, Lutnick said, the US will repeal previous countermeasures restricting the supply of certain materials for jet engines and ethane, but will not overturn all its export controls.
The commerce secretary spoke about ethane in greater detail, claiming China’s reliance on the US’ supply of the gas creates a pressure point in bilateral negotiations.
“Ethane makes plastic. We supply 98 per cent of their ethane. No ethane, no plastic. Imagine trying to run an economy with no plastic. So, if you want to annoy us, the United States of America under Donald Trump is strong enough to annoy you back equally.”
02:09
China, US top negotiators agree on ‘framework’ that will need approval from Xi and Trump
Regarding chips, Lutnick said the Chinese side regularly asks for the relaxation of export restrictions, “and we always say no”.
What has China said so far?
People’s Daily, the official press organ of the Communist Party, said in a commentary on Thursday that the London talks were a step toward solving trade disputes through equal dialogue. The newspaper called for the US to honour its words with actions.
Vice-Premier He Lifeng, who led the delegation in London, said China is “sincere but also principled”. He urged the two to safeguard the hard-won outcomes of their dialogue and maintain ongoing communication, state news agency Xinhua reported.
Li Chenggang, vice-minister of commerce and another high-ranking member of the delegation, described communication between the two sides as “highly professional, rational, in-depth, and candid”. He expressed hope the talks will enhance mutual trust, promote bilateral trade relations and “inject positive energy” into global economic growth.