US and China Reach Fragile Trade Framework Deal While Key Disputes Remain Unresolved
Fragile Handshake: US-China Strike Tentative Trade Truce as Critical Minerals Hang in Balance
Shadow Boxing in London: A Deal on Paper, Trust in Question
LONDON — Chinese and American negotiators emerged Tuesday with what one might generously call a ceasefire rather than a peace treaty. The preliminary trade framework agreement, announced June 10 by China's Vice Minister of Commerce Li Chenggang, resets the game board to April 2 positions but leaves the most contentious pieces still in play.
"Professional, rational, in-depth, and candid," reads the diplomatic language describing the two days of talks. Behind that careful phrasing lies a fragile arrangement that analysts say amounts to pressing pause rather than resolving fundamental conflicts over rare earth minerals and advanced technology that have destabilized global markets.
"This is essentially a procedural truce, not a substantive deal," said a senior economist at a major investment bank. "History shows these frameworks without metrics typically collapse within two months."
The carefully choreographed London summit brought together Chinese Vice-Premier He Lifeng and Commerce Minister Wang Wentao with their American counterparts Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer. Both presidents—Xi Jinping and Donald Trump—must now approve the framework before implementation.
Earth's Rarest Treasure: The Mineral Crisis Driving Detroit to a Halt
At the heart of tensions lies access to rare earth elements—17 metals with magnetic and conductive properties essential to everything from electric vehicles to wind turbines and military hardware. China's stranglehold on global supply has become its most potent economic weapon.
The numbers tell a stark story: Chinese rare earth exports plummeted to 5,864 tons in May, representing a staggering 48.3% year-over-year drop. This supply shock reverberated across global manufacturing, most visibly when Ford Motor Company halted production lines for its Explorer SUV due to magnet shortages.
Under the London framework, China has offered to restore civilian exports to pre-April levels through temporary six-month licenses. The critical exemption: American military contractors remain cut off, maintaining pressure on a sector that consumes approximately 15% of specialized neodymium-iron-boron magnets.
"The temporary licenses are discretionary and revocable," noted a commodities specialist tracking the negotiations. "Global automakers and green tech manufacturers can't build stable supply chains on such shaky foundations."
Silicon Ceiling: The AI Chip Battle Rages On
If rare earths represent the physical resource battleground, advanced semiconductors embody the intellectual one. The London agreement explicitly maintains American restrictions on H20-class and above GPU chips—the computational engines powering cutting-edge artificial intelligence development.
The framework's language that technology export curbs are "to be reviewed" rings hollow to industry analysts, who point out that the Commerce Department's Bureau of Industry and Security—not Treasury—controls these restrictions. No one at the London table had authority to lift them.
This semiconductor stalemate reveals a fundamental contradiction in American strategy: wanting to maintain chip exports to China while simultaneously preventing Chinese AI advancement. Beijing's response has been equally rigid: "If we can't develop our own chips and AI, we won't buy yours either."
For companies like Nvidia, this translates to an estimated $5-5.5 billion revenue headwind for fiscal year 2025, forcing pivots toward modified chip architectures that balance export compliance with commercial viability.
Behind the Diplomatic Curtain: Six Hours of Tense Negotiation
Sources familiar with the talks described over six hours of "heated but structured" exchanges. Chinese officials emphasized that "real progress is impossible" without American "sincerity," while U.S. representatives struggled to present a unified front amid reported infighting between Lutnick, Bessent, and Greer.
The resulting 90-day pause on new tariffs—leaving existing levies averaging 30% on $320 billion of goods untouched—appears designed primarily to bridge both nations through politically sensitive summer events: Trump's July G-7 summit and Xi's critical Third Plenum economic planning meeting.
"Neither side wants a trade war escalation during these critical domestic moments," said an international relations expert tracking the negotiations. "But the framework lacks binding enforcement mechanisms, making it vulnerable to the next perceived provocation."
Market Tremors: Economic Ripples Beyond the Negotiating Table
Markets responded with measured optimism to news of the framework. MP Materials, America's largest rare earth producer, spiked 9% intraday before settling at $27.23, down slightly as investors recognized the agreement's limitations. Nvidia shares barely budged, gaining just 1% to $143.96 as traders had already discounted the probability of chip ban relief.
The Chinese yuan briefly strengthened from 7.36 to 7.30 against the dollar before surrendering half those gains—price action consistent with skepticism about the framework's durability.
These market movements occurred against a troubling global economic backdrop. The World Bank recently slashed its 2025 growth forecast to 2.3%—the weakest non-recession performance since 2008. Even its optimistic scenario, assuming half of all tariffs are removed, would add just 0.2 percentage points to global growth.
Critical Countdown: The Summer of Decision Points
The framework faces a gauntlet of stress tests in coming weeks:
- June 20: China Customs releases detailed breakdown of May rare earth exports, providing the first concrete evidence of Beijing's commitment
- July 8: White House certification deadline to extend the 90-day tariff pause
- July : Bureau of Industry Security review of H20-class export restrictions
- August 1: Expiration of the Geneva tariff truce that preceded these talks
Each date represents a binary risk event capable of unwinding the fragile progress made in London.
Investment Compass: Navigating Uncertain Seas
For investors seeking to position portfolios amid this geopolitical chess match, analysts suggest treating the London framework as "a call option on détente" with limited downside but asymmetric upside if substantive concessions materialize.
Non-Chinese rare earth producers like MP Materials and Lynas remain structurally advantaged regardless of temporary license approvals. The VanEck Rare Earth/Strategic Metals ETF , down 28% year-to-date, may find support at current levels while offering leveraged exposure to any further supply disruptions.
In semiconductors, Nvidia's CUDA software ecosystem and dominant position in U.S. hyperscaler demand should sustain its growth trajectory despite China headwinds. Investors might consider buying on weakness while hedging event risk around the July catalyst window.
Fixed income and currency markets suggest maintaining long-duration U.S. Treasuries, as the trade truce removes left-tail risk but lacks sufficient substance to alter the Federal Reserve's policy path.
The London framework represents the latest chapter in a complex economic relationship between the world's largest economies, not its conclusion. While providing temporary reprieve from escalation, the fundamental tensions over technology leadership and critical resource access remain unresolved. Past performance is not indicative of future results, and investors should consult financial advisors for personalized guidance.