A Temporary Agreement
After months of rising economic tensions, the United States and China have announced a new trade agreement — again. Following the breakdown of prior negotiations, representatives from both nations met in London with the aim of reaffirming commitments made during the May Geneva summit. On Tuesday night, both Chinese and American officials confirmed that a framework had been reached and was being forwarded to their respective leaders for final approval.
President Donald Trump proclaimed the breakthrough on Wednesday via a Truth Social post, stating: “Our deal with China is done.” According to the president, the agreement includes a mutual easing of export restrictions and a renewed commitment by China to supply rare earth minerals — key elements in electronics and military equipment — “up front.”
However, despite the announcement, the so-called “truce” largely returns both countries to the fraught trade dynamics that existed before April. Tariffs remain high, core restrictions remain in place, and most major policy differences remain unresolved. American high-tech exports are still blocked, and Chinese automakers continue to face barriers entering the U.S. market.
A Necessary Pause
This agreement may provide temporary relief for businesses and markets weary from escalating tariffs and uncertainty. After Trump’s aggressive April 2 “Liberation Day” declaration — which imposed a 145% tariff on most Chinese imports — trade between the two countries had virtually stopped. This crippled supply chains, increased inflationary pressure, and alarmed Wall Street.
U.S. Treasury Secretary Scott Bessent, who led negotiations, acknowledged that the previous tariff regime was “unsustainable.” On May 12, both sides pledged to reduce some tariffs, prompting economists to revise their recession forecasts and lifting consumer confidence slightly. However, hopes of a lasting agreement were short-lived as accusations of broken promises quickly followed.
According to U.S. officials, China was slow to fulfill its promise to release rare earth exports, prompting retaliatory U.S. restrictions. China controls the global supply of these minerals, which are vital for cars, aircraft engines, medical imaging technologies, and cancer treatments. Although President Trump claimed Chinese President Xi Jinping agreed to resume exports, analysts say the flow has yet to return to pre-dispute levels.
If both nations finally honor their commitments, the current deal could help prevent the dire consequences once feared, such as supply chain collapses and critical material shortages.
Persistent Frictions
Despite renewed optimism, structural tensions remain. Both the Trump and Biden administrations have accused China of imposing restrictive trade practices and facilitating intellectual property theft. China has consistently denied these accusations.
While President Trump initially imposed tariffs citing national security concerns, his second administration has dramatically escalated the trade war. The White House now enforces a universal 10% tariff on nearly all imports, and an additional 20% surcharge specifically on Chinese goods — part of Trump’s strategy to combat the flow of fentanyl into the U.S.
The administration also eliminated the “de minimis” exemption, which previously allowed low-cost packages (under $800) to enter the U.S. without tariffs. This move has severely disrupted Chinese e-commerce platforms like Shein and Temu, which rely on high volumes of small shipments.
These compounded trade barriers have made Chinese goods more expensive for American businesses and consumers, forcing many companies to seek costly alternatives. Tech giants like Apple are attempting to move some manufacturing out of China, yet still face increased costs. Apple has warned of an additional $900 million in quarterly expenses from the tariffs alone.
In other sectors, such as aviation, the impact has been even more severe. Boeing has virtually exited the Chinese market — the world’s largest for new aircraft — with no significant sales since 2019, despite no formal ban from Beijing.
Looking Ahead
Despite the unresolved issues, President Trump struck a positive tone: “President XI and I are going to work closely together to open up China to American Trade,” he wrote Wednesday. “This would be a great WIN for both countries!!!”
Whether this agreement marks the beginning of a new era or is just another brief pause in an ongoing conflict remains to be seen. If both sides lower barriers and rebuild trust, the benefits could be substantial. But as past experience shows, optimism alone will not hold this fragile truce together.