US and China agree framework deal to extend trade war truce.

The US and China have extended the truce in their trade war after two days of talks in London that resulted in a “framework” deal over export restrictions on rare earths and semiconductors.

Negotiations to resolve the wider tariff war triggered by Donald Trump in April will continue but the truce settles, for now, growing tension between the two economic super-powers.

 The talks, which broke up at about midnight UK time after more than 20 hours of discussions over two days, were led by the Treasury secretary, Scott Bessent, alongside the US commerce secretary, Howard Lutnick, and the trade representative, Jamieson Greer.

Lutnick expressed optimism on Tuesday that concerns about critical or rare earth” minerals and magnets, which are vital to a range of industries including cars, electronics and defence, would be resolved as the deal was implemented.

The wider dispute, triggered by Trump’s decision to impose triple-digit tariffs on Chinese imports in April – since eased to a baseline 30% – has yet to be resolved with China’s exports to the US plunging 35% year on year in May.

Both sides had accused each other of reneging on a preliminary trade deal struck in Geneva last month to ease retaliatory tariffs, with China putting restrictions on exports of rare earths and the US continuing curbs on semiconductor exports.

But the trade war has already caused damage on both sides, whatever the positioning and rhetoric. China’s exports to the US plunged 35% year on year in May.

The choked global supply of rare earths, which China controls, was already threatening to halt production in the automotive sector this summer on both sides of the Atlantic, with permanent magnets used in everything from windscreen wipers to doors.

Source: Theguardian