How Will Trump and Xi's London Talks Affect Wider Sino-US Trade Relations
Marina Gruzer | 25 June 2025
Summary
The June 2025 Trump-Xi meeting in London introduced a framework to lower reciprocal tariffs, in line with the 90 days tariff pause established at the earlier Geneva meeting, aiming to resolve trade tensions exacerbated by China’s rare earth export restrictions and US semiconductor curbs.
Although China has temporarily eased some REE export limits, deep divisions remain over dual-use technologies critical to defence, with both countries maintaining export controls that link trade disputes to broader security concerns.
Over the long term, the US is expected to reduce its dependence on Chinese REE supply through partnerships with alternative producers like Australia, but China’s dominance in critical mineral processing means it will remain a key supplier.
On 9 June 2025, United States (US) President Donald Trump and Chinese President Xi Jinping met in London amid escalating trade disputes between the US and China. This meeting facilitated a bilateral framework aimed at implementing tariff pause agreements made at the previous Geneva summit, which offer 90 days for both countries to finalise a trade deal. Both countries face international pressure to reduce tensions due to the impact of China’s rare earth element (REE) export licensing restrictions on global manufacturers and the effect of Trump’s tariff policy on US trade partners. The London talks emerged as a result of China’s slow change to REE export restrictions as well as Washington's efforts to limit Beijing’s access to semiconductors. Bringing down reciprocal tariffs, from over 100% to 55% and 10% on Chinese and US goods, respectively, is a key step in developing a more stable trade partnership. However, continued unresolved disputes regarding the export of materials relating to dual-use technology may threaten a finalised trade deal.
The London meeting highlights a broader vulnerability in the US to fluctuations in REE markets, indicating that China’s dominance in this sphere presents opportunities for leverage. Trump faced significant pressure from domestic automakers and aerospace manufacturers who were impacted by the export restrictions implemented by China, accounting for 90% of global critical mineral processing. While Trump maintains some leverage over China via the semiconductor chip trade, the scale of China’s REE export restrictions has had a more significant impact on domestic industries in the US. Some manufacturers, such as Ford, were forced to pause production of affected models due to restrictions on the supply of rare earth elements. This leverage is emphasised by the high costs and long-term investment necessary to develop reliable alternative supply chains. Overall, the London talks have created a potential pathway for de-escalating trade disputes following growing pressure on both economies.
Another implication of the London talks is the increasing security-related concern regarding the export of specialised dual-use materials. Following the London meeting, disputes over REE and magnet export limitations persist, despite a temporary pause on some restrictions that are crucial for automobile manufacturing. While China has agreed to ease REE export limits for six months, Beijing has not made commitments to remove export restrictions on specialised REEs that have military applications. Similarly, the US continues its own export limitations on dual-use chips to China in retaliation for rare earths restrictions. Therefore, pressure remains in areas of trade relations that overlap with security concerns.
Crucially, implications arise regarding the wider global trade of REEs and continued price fluctuations. While China’s restrictions on rare earth export licensing are set to be eased for a 6-month period, the reduced supply chains are highly likely to cause continued price increases for the affected heavy REEs. Additionally, this is likely to be exacerbated by potential stockpiling policies implemented by manufacturers concerned about limited REE supplies. With REEs being a key area of leverage, China may change rare earth export policies in retaliation for further escalations in trade relations, contributing to continued REE global market volatility.
Sgt. 1st Class Mikki Sprenkle
Forecast
Short-term (Now - 3 months)
With the current Geneva deadline set for 10 August, despite the risk of security-based delays, there is a realistic possibility that a trade deal will emerge in the next few months following the pause on some Chinese REE export restrictions and an announced framework to reduce the bilateral reciprocal tariffs.
Medium-term (3-12 months)
China’s partial pause on rare earth export restrictions for US manufacturers is still set for 6 months and it remains unclear if further restrictions will be removed. It is unlikely that restrictions on heavy REEs essential for defence manufacturing will be removed due to broader security competition between China and the US.
Long-term (>1 year)
It is highly likely that the US will aim to diversify their rare earths supply chains to limit China’s strategic leverage. It is realistically possible for this to include supply chain development, collaboration with other REE producers such as Australia.
However, it is almost certain that China will remain as a major actor in US rare earths trade in the long term.
