In an effort to end a trade war between the world’s two largest economies, the United States and China have reached an agreement to speed up the delivery of rare earth minerals to the US.
Donald Trump, the president of the US, claimed on Thursday that he had already signed a deal with China the day before, but he would not provide further details. He also said that he anticipates signing a trade agreement with India in the coming days.
The US and China’s reduction of mutual tariffs came after talks in Geneva in May led to Thursday’s announcement.
Talks in London began in June, setting the stage for negotiations. The announcement made on Thursday appeared to confirm that understanding.
A White House official stated on Thursday that the Trump administration and China had reached an additional understanding regarding the implementation of the Geneva agreement.
China’s Ministry of Commerce stated that it would review and approve applications for items that fall under the export control laws, as well as providing a framework for a deal.
What are our current knowledge of the US-China deal?
Following Donald Trump’s “Liberation Day” announcement on April 2 during US-China trade talks in Geneva, Beijing pledged to remove non-tariff countermeasures imposed against the US.
Washington first announced so-called “reciprocal” import duties when it halted them for 90 days, with the exception of its 145 percent tariff on China. On July 9, this pause is scheduled to come to an end.
China retaliated by imposing a 125 percent tariff on US goods, suspending exports of a wide range of crucial minerals, and endangering US carmakers, semiconductor companies, and military contractors’ supply chains.
However, US Commerce Secretary Howard Lutnick stated to Bloomberg TV on Thursday that “they’re]China going to deliver rare earths to us,” and that “we’ll take down our countermeasures” once they do so. Export restrictions on materials like chip software and ethane, which are used to make plastic, are among those US countermeasures.
The Chinese Commerce Ministry’s spokesperson stated on Friday that “both sides have further confirmed details about the framework after approval.”
According to the spokesperson, “The Chinese side will evaluate and approve eligible applications for controlled item exports in accordance with the law.” A number of restrictive measures against China will also be repealed by the US side.
According to two people with knowledge of the situation, China granted temporary export licenses to the top three US automakers in early June as supply chain disruptions started to appear as a result of export restrictions on those goods.
By codifying the conditions set out in Geneva, such as a commitment from China to deliver rare earths to all US businesses, Lutnick claimed the agreement from this week, which was signed on Wednesday, would amount to a wider agreement.
What makes Chinese rare earth minerals so crucial?
The US’s ongoing trade negotiations with China are centered on their export of rare earth elements. The world’s rare earths are mined to roughly 90 percent of their size, and Beijing is almost at the top of that field.
The auto industry, which relies on rare earth magnets for steering systems, engines, and catalytic converters, has grown particularly interested in critical minerals, a group of 17 elements that are crucial to a number of manufacturing processes.
Automobile manufacturers have already voiced concerns about the lack of rare earths and the magnets used to make them in their factories, which have already been shut down. A Ford executive claimed earlier this week that the business was “hand to mouth.”
Rare earths are used in a variety of products, including televisions, smartphones, and windmills, which are essential for the transition to clean energy. Additionally, they are used to produce AI processors, missile systems, and fighter jets.
What other trade agreements does Trump claim to be close to reaching?
Before his July 9 deadline for reinstating higher trade tariffs, which he paused on April 9, Lutnick told Bloomberg that Trump is also working on a number of trade agreements in the near future.
He said, “We’re going to do the top 10 deals, put them in the right category, and then these other countries will fall behind.”
Which countries would be included in that first wave of trade agreements, Lutnick did not specify. Trump made the suggestion that the US was close to reaching an agreement with India earlier on Thursday.
According to Bloomberg News, chief negotiator Rajesh Agarwal and other Indian trade officials are scheduled to meet in Washington for two days this week.
US officials have also spoken with nations like Vietnam, South Korea, Japan, and the EU in recent months.
Only the UK and the US have so far reached a trade agreement, while China and the United Kingdom have both signed lower reciprocal tariffs in Geneva.
Despite the agreement with the UK, there were still some issues raised, including the discounts that were imposed on some British metal exports.
What agreements are the US still trying to strike?
Prior to the expiration of reciprocal tariffs in early July, the majority of America’s major trade partners, including Canada, Vietnam, and South Korea, are anticipated to engage in contentious discussions with Washington.
There is no certainty for any of them as of yet, but the majority of nations are hoping to have their tariffs as much as possible and, if not, to extend the deadline for July.
Talks on particular topics have included:
European Union
A deal with the European Union, which had a $ 235.6 billion trade surplus with the US in 2024, remains a significant stumbling block.
The issue is whether EU leaders and the European Commission, which oversees trade issues for the 27-member bloc, agree to an “asymmetrical” trade agreement with the US, which would require terms that would be more advantageous to the US in order to close a deal more quickly.
Some member states are viewed as opposed to tit-for-tat retaliation, favoring a quick tariff cut over a flawless one.
Others are in opposition, though. France has pushed for the removal of tariffs and has rejected the idea of any deal favoring the US.
Japan
Japan wants to ratchet up any potential US tariffs in one go. However, Trump’s 25 percent tariffs on cars and car parts have been a sticking point in the negotiations.
Because autos account for the majority of its trade deficit with Japan, Washington is focused on the auto industry.
Tokyo’s automotive sector, which accounts for about 10% of the country’s GDP, is seen as a key component of its economy.
Tokyo’s top trade negotiator, Ryosei Akazawa, reiterated Tokyo’s position on Thursday by saying, “We find the 25 percent car tariff to be unacceptable.”
Could the US’s tariff deadline go beyond July?
The White House said on Thursday that President Trump might choose to extend the deadline for reimposition of tariffs on most of the world’s nations.
Trump’s July deadline for resuming tariffs is “not critical,” according to White House Press Secretary Karoline Leavitt.
Leavitt said, “Perhaps it could be extended, but the president has to make that choice.”
She added that the president can “merely provide these countries with a deal” if any of those nations refuse to sign a trade agreement with the US by the deadlines.
The president can choose a reciprocal tariff rate that she believes will benefit both the American worker and the United States, she continued.
Source: Aljazeera
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