Optimism Grows on Day Two of US-China Trade Discussions

The United States and China engaged in a second day of discussions in London on Tuesday, as the US hinted at potential resolutions to the ongoing trade dispute that has been weighing on the global economy.

The talks were reported to be “going well,” according to US Commerce Secretary Howard Lutnick, who stated in an interview with Bloomberg Television that he anticipated a full day of discussions.

As investors waited for news from the meetings, global stock markets showed little movement, reflecting uncertainty about the outcomes of the negotiations intended to solidify a delicate truce.

“The absence of positive news has put pressure on stocks and the dollar,” noted Kathleen Brooks, research director at the XTB trading platform.

On Monday, a senior advisor to President Donald Trump expressed optimism, predicting “a strong handshake” following the negotiations at London’s historic Lancaster House.

Trump, speaking to reporters at the White House, remarked, “Our relationship with China is improving. China’s not an easy negotiating partner,” while adding, “I’m receiving good reports.”

This high-level meeting between officials from the two largest economies began on Monday, following a prior round of discussions in Geneva last month.

A key topic on the agenda is China’s exports of rare earth minerals, essential for various technologies, including smartphones and electric vehicle batteries.

Trump’s chief economic advisor, Kevin Hassett, mentioned, “During our Geneva meeting, we agreed to reduce tariffs, and they pledged to release the magnets and rare earth elements necessary for our economy.”

While some supplies are being released, Hassett noted that the process is slower than many companies would prefer.

Despite this, Hassett remains hopeful about strong outcomes from the discussions, including expectations of easing US export controls and increased availability of rare earth minerals.

Possible Concessions?

Relations between the US and China have grown more strained since Trump took office in January, with both nations implementing tariffs against each other’s goods.

A temporary agreement reached in Geneva saw US tariffs on Chinese products decrease from a staggering 145% to 30%, while China’s counter-tariffs dropped from 125% to 10%.

However, Trump recently claimed that China had “completely breached” the terms of the agreement.

Analysts have expressed caution regarding potential outcomes. “We doubt that the US will fully backtrack, which could limit any rally in the markets,” said Thomas Mathews, head analyst for Asia Pacific markets at Capital Economics.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, added that while there hasn’t been a major breakthrough, the initial day of the second round of talks appeared promising.

Rumors are circulating that the US may be open to easing tech export restrictions in exchange for China relaxing its limitations on rare earth metal exports.

In April, which Trump dubbed “Liberation Day,” he imposed sweeping 10% levies on a wide range of countries, signaling the possibility of higher rates on numerous economies.

These tariffs have significantly affected trade, with figures from Beijing indicating that exports to the US plummeted by 12.7% in May.

In addition, China is engaged in discussions with other trading partners, including Japan and South Korea, to present a united front against Trump’s tariffs.

Chinese leader Xi Jinping called on South Korea’s new President Lee Jae-myung to collaborate with Beijing in promoting free trade and ensuring stability in global and regional supply chains, as reported by Xinhua news agency.

The Chinese delegation in London is led by Vice Premier He Lifeng, along with Commerce Minister Wang Wentao and Trade Representative Li Chenggang.

The US team includes Treasury Secretary Scott Bessent, Commerce Secretary Lutnick, and Trade Representative Jamieson Greer.