Trade negotiations between the United States and China will resume in London on June 9, 2025.

Kevin Hassett, Director of the National Economic Council, indicated a positive outlook for a potential deal following these discussions.

The meetings will be led by Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent, and US Trade Representative Jamieson Greer.

These talks come after months of fluctuating tensions, which included a temporary reduction of tariffs under a 90-day agreement in April.

Under that agreement, the US lowered tariffs on Chinese goods from 145% to 30%. Meanwhile, China reduced its tariffs on American imports from 125% to 10%.

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🔗 Source: CNN

🧠 Food for thought

1️⃣ Rare earth minerals: A small market with outsized strategic importance

Despite representing only a US$5-7 billion annual market, rare earth minerals have become central to US-China trade tensions due to their critical role in modern technology and defense systems 1.

China’s dominance is overwhelming, controlling 60% of global extraction and nearly all refining capacity for heavy rare earths, creating a significant vulnerability for US manufacturers and defense contractors 2.

The April 2025 export restrictions on seven key rare earth elements was a calculated move by China, targeting materials essential for US defense technology and requiring special export licenses that disrupted global supply chains 2.

This leverage explains why restoring the flow of these minerals is a top priority in current negotiations, as the US Department of Defense has invested over $439 million to develop domestic supply chains but faces significant challenges in reducing dependence 2.

The minerals’ importance extends far beyond their market value, as they’re essential components in technologies ranging from smartphones and electric vehicles to sophisticated military systems like radar and guidance systems 1.

2️⃣ Trade war’s limited economic impact despite bold claims

Despite the Trump administration’s assertion that tariffs are “reducing inflation and helping reduce the deficit,” historical data shows mixed results from the escalating trade war that began in 2018 3.

The US trade deficit with China stood at $295 billion in 2024, demonstrating that significant imbalances persist despite tariffs that reached as high as 145% on Chinese goods 4.

When the US and China reached their phase-one agreement in 2020, China failed to meet its commitment to purchase an additional $200 billion in US goods, highlighting the challenges of enforcing trade deals even with punitive measures in place 3.

Manufacturing job losses in the US have continued, particularly in regions heavily impacted by competition with China, suggesting that tariffs alone haven’t reversed long-term economic trends 4.

3️⃣ The evolving bargaining power in a centuries-old trade relationship

Current negotiations represent a dramatic shift in the US-China economic relationship that began in 1784 when the first American trading ship, the Empress of China, sailed to Guangzhou carrying ginseng and returning with tea and silk 5.

This relationship has grown from just $4 billion in trade in 1979 to over $750 billion by 2022, transforming China from a minor trading partner to America’s third-largest trading partner behind only Canada and Mexico 6.

The relationship has experienced significant turning points, including China’s 2001 entry into the World Trade Organization, which accelerated trade but also led to concerns about unfair practices and state intervention in China’s economy 6.

While historical trade focused on consumer goods and manufacturing, today’s tensions center on technological competition and strategic resources, reflecting China’s evolution from a source of inexpensive goods to a technological competitor in advanced industries 7.

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