US and Chinese officials have agreed on a framework to get their trade truce back on track and resolve China’s export restrictions on rare earth minerals and magnets. US Commerce Secretary Howard Lutnick announced this on Tuesday following two days of intensive negotiations in London.

Lutnick told reporters that the framework agreement adds “concrete substance” to the deal reached in Geneva last month, which aimed to ease retaliatory tariffs that were disrupted by China’s restrictions on critical mineral exports. The agreement will also lift some recently imposed US export restrictions.

“We have reached a framework to implement the Geneva consensus and the meeting between the two presidents,” Lutnick said. “The idea is to go back and talk to President Trump and make sure he approves. They will also go back and talk to President Xi and make sure he approves. If approved, we will implement the framework.”

Top economic officials from the US and China have been pushing for a deal to ease mutual export restrictions that threatened to derail the Geneva agreement, which had lowered tariffs that had reached triple-digit figures.

In a separate briefing, Chinese Vice Minister of Commerce Li Chenggang also confirmed that a trade framework had been agreed upon to be presented to the US and Chinese leaders.

“The two sides have, in principle, reached a framework for implementing the consensus reached by the two heads of state in their phone call on June 5 and the consensus reached at the Geneva meeting,” Li told reporters.

“We hope the progress made at the London meeting will contribute to strengthening trust between China and the US and to the healthy and stable development of economic and trade ties between the two countries,” he added.

While Li did not provide details on the progress made in the talks, the parties are expected to announce the content of the agreement after receiving approval from their respective national leaders.

Lutnick stated that China’s restrictions on the export of rare earth minerals and magnets to the US would be resolved as a “fundamental” part of the framework agreement.

“There were also a series of measures implemented by the United States when these rare earths were not forthcoming. You should expect those to be lifted in a balanced way, as President Trump has said,” Lutnick noted.

The new round of negotiations, initiated by the US and China to resolve trade tensions that had escalated with mutual tariff hikes, took place on June 9-10 at Lancaster House, a government mansion within walking distance of Buckingham Palace in London.

The historic venue, which also houses the British government’s 39,000-bottle wine cellar, was provided by the British government as a neutral ground for the talks between the two economic superpowers.

The US delegation was represented by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer. The Chinese side was represented by Vice Premier He Lifeng, who is responsible for economic relations, Minister of Commerce Wang Wentao, and International Trade Representative Li Chenggang.

The London meeting was the first face-to-face encounter between He and Bessent since the signing of the 90-day truce agreement in Geneva.

The high-stakes negotiations were initiated to prevent two challenging issues—China’s rare earth exports to the US and US controls on technology exports to China—from derailing the broader talks.

Before the first round of talks in Geneva, Bessent had warned that the high tariffs imposed by both sides amounted to an embargo on bilateral trade. Highlighting the risks, China’s exports to the US in May saw their sharpest year-on-year decline since the 2020 pandemic.

The US accused China of failing to honor its commitment made in Geneva to ease restrictions on rare earth element exports, while Beijing increased pressure on Washington to lift its technology-related export controls. China also reacted strongly to the US announcing new restrictions after the Geneva meeting.

The US accused China of foot-dragging on approving shipments of rare earth elements, which are vital for the defense, automotive, and technology sectors. The slow pace of approvals has affected manufacturing supply chains in the US and Europe.

Beijing, in turn, accused Washington of “seriously violating” the Geneva agreement by issuing new warnings about the global use of Huawei chips, halting the sale of chip design software to Chinese companies, and canceling the visas of Chinese students.

On Monday, a senior White House official indicated that Trump might ease restrictions on chip sales to China if Beijing agreed to expedite the export of rare earth elements.

This would represent a significant policy shift from the Joe Biden administration’s “small yard, high fence” approach, which sought to limit China’s ability to acquire US technology.

Concerns are deepening over the potential damage from China’s restrictions on critical mineral exports, prompting some European automakers to consider measures against shortages of rare earth elements.

In April, China’s decision to suspend exports of a wide array of rare earth elements and associated magnets, reportedly in response to excessive tariffs imposed by US President Trump, disrupted supply chains crucial for automakers, aerospace manufacturers, semiconductor companies, and military contractors globally. This action underscores China’s dominance in the critical mineral industry, which is pivotal for the green energy transition, and is perceived as leverage in its trade dispute with the US. China accounts for approximately 90% of the global production of rare earth elements.

In May, US automaker Ford was compelled to halt production of its Explorer model at its Chicago plant for several days.

European Union Trade Commissioner Maros Sefcovic stated on Wednesday that he and his Chinese counterpart had agreed to clarify the issue of rare earth elements as soon as possible. EU Industry Strategy Commissioner Stephane Sejourne remarked, “We must reduce our dependence on all countries, especially certain nations like China, upon which we are more than 100% reliant.” After Brussels identified 13 new projects aimed at boosting metal and mineral supplies, Sejourne commented, “Export restrictions intensify our desire to diversify.”

Earlier on Wednesday, Mercedes-Benz production chief Joerg Burzer revealed that the automaker is in discussions with its largest suppliers about establishing “buffers,” such as rare earth stockpiles, to safeguard against potential supply threats. Currently, Mercedes is not affected by shortages. BMW reported that while a segment of its supplier network has been affected by shortages, its own manufacturing plants continue to operate normally.

The European automotive suppliers’ association, CLEPA, indicated that several production lines have been shut down due to depleted supplies and issued a warning about the escalating threat these controls pose to production. CLEPA further noted that only a quarter of the hundreds of export license applications submitted by automotive suppliers since early April have been approved, with some applications reportedly rejected by authorities due to “high procedural reasons.” CLEPA, without disclosing the names of the affected companies, warned that further disruptions are possible.

While China’s April announcement coincided with a broader retaliatory package against Washington’s tariffs, these measures are being enforced globally, generating concern among business executives across the world. Last week, German and US automakers voiced complaints, echoing similar concerns from an Indian electric vehicle manufacturer, that China’s imposed restrictions are threatening production. Many are urging their respective governments to find a swift solution and are actively seeking alternative supply sources.

Wolfgang Weber, CEO of Germany’s electrical and digital industry association ZVEI, stated via email that some companies possess supplies sufficient for only a few weeks or months. “Companies currently feel abandoned by policymakers and are, in part, seeking their own solutions to the challenging situation in China,” he remarked.

Swedish company Autoliv, the world’s largest manufacturer of airbags and seatbelts, announced that its operations remain unaffected. However, CEO Mikael Bratt mentioned that he has established a task force to manage the evolving situation.

Reports indicate that unconventional strategies are being explored in the US to secure urgently needed rare earth elements, or at least components derived from them. Consequently, automakers, in particular, are contemplating shifting the production of relevant components to China. Some are even considering sending nearly finished parts, such as electric motors, to China for the installation of indispensable rare earth magnets, with these components subsequently being shipped back to Western countries.

Dependence on China

Automakers such as General Motors and BMW, along with major suppliers like ZF and BorgWarner, are actively researching or developing motors with low or zero rare earth content to lessen their dependence on China. However, few have successfully scaled production to achieve cost reductions. BMW has begun incorporating magnet-free electric motors into its latest generation of electric vehicles. Nevertheless, the company still requires rare earths for smaller motors that power components such as windshield wipers and window regulators. German automaker Volkswagen has stated that it currently perceives no shortages.

China’s tightening of critical mineral export controls, following the initiation of a trade dispute by the US, has become a central theme in Trump’s criticisms of Beijing. Trump has sought to redefine trade relations with the US’s largest economic competitor by imposing substantial tariffs on billions of dollars worth of imported goods, aiming to reduce the trade deficit and recover lost manufacturing jobs. Trump imposed tariffs of up to 145% on Chinese goods, but subsequently retracted them following a significant sell-off in stock, bond, and currency markets, which was attributed to the broad scope of these tariffs. China retaliated with its own tariffs and is leveraging its dominance in crucial supply chains to pressure Trump into retreating.

The US President asserts that China violated a ceasefire agreement, reached in Geneva last month, which stipulated the rollback of tariffs and trade restrictions. Beijing, in turn, accuses Washington of breaching the agreement. The Trump administration further escalated the conflict with actions that Beijing described as “excessive pressure measures.” These included threatening to cancel visas for Chinese students in the US and halting the sale to China of certain key technologies related to jet engine semiconductor design.

Trump and Chinese President Xi Jinping are anticipated to meet this week. It is expected that the two leaders will attempt to resolve their differences, with export restrictions anticipated to be a prominent item on the agenda. In a social media post on Wednesday, Trump underscored the fragility of any potential agreement, stating that Xi was “VERY TOUGH AND VERY HARD TO MAKE A DEAL WITH.”

Another option: Ending the economic war

Alternatively, ending the economic conflict with China could offer a resolution. If North American and European nations were to lift their export restrictions targeting China, they might anticipate an exemption from Chinese countermeasures, which were implemented in response to the West’s economic pressure. However, such a move is not anticipated under current circumstances.

Industry representatives suggest that the EU could also act independently, without consulting the US. For instance, it could lift the ban on the export to China of cutting-edge machinery used in semiconductor production, manufactured by the Dutch company ASML. Such an action would alleviate tensions in the ongoing economic conflict. Nevertheless, there are currently no indications that such a step will be taken within the EU.

The United Kingdom is on the verge of signing a £1.6 billion trade deal with Gulf states.

This agreement with the Gulf Cooperation Council (GCC)—comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—will mark Prime Minister Keir Starmer’s fourth major trade pact, following accords with the US, India, and the EU.

The UK government has announced its hope that the agreement will contribute an additional £8.6 billion annually to trade with GCC countries by 2035. Sources close to the negotiations in the oil-rich region stated that the deal is currently in its final stages, with an expectation that the UK will approve it shortly.

The deal appears particularly advantageous for the automotive industry and financial services. However, projections indicate the free trade agreement will likely contribute less than 0.1% to GDP over the next decade.

Nevertheless, a backlash is anticipated concerning a chicken import component of the deal, which could significantly harm British farmers due to potentially lower animal welfare standards in imported products.

According to information obtained by The Guardian, the Trades Union Congress (TUC) is among those urging caution regarding the agreement and has communicated its concerns to ministers.

Human rights organizations have previously contended that the UK should not enter into the free trade agreement without legally binding commitments to enhance human rights, particularly for migrant workers. They have emphasized that both the UK and the GCC should integrate robust human rights clauses into all future agreements, and that the UK government should transparently present an independent impact assessment on the potential consequences of deepening trade relations.

Another source familiar with the negotiations suggested that while some language addressing human rights is likely to be included as part of the commitments, there will be no legal obligation.

A spokesperson for the Department for Business and Trade confirmed that negotiations for a trade deal with the GCC are ongoing, with no deadline set. Ministry sources noted the possibility of a pause in negotiations due to Eid al-Adha, which commences on June 6.

The UK-GCC trade agreement will also affect the UK’s net-zero emission targets, as all six GCC nations rank among the top 10 globally for per capita carbon emissions.

TUC General Secretary Paul Nowak remarked, “The TUC has directly conveyed its concerns to ministers about the trade deal with Gulf countries, and we will continue to do so. Our view on trade deals is consistent: the government should not make deals with countries that violate human rights and workers’ rights and flout international law. It was the right decision for the government to suspend trade talks with Israel.”

Ministers are also expected to face opposition from the National Farmers’ Union concerning the agricultural aspects of the agreement. Industry representatives informed The Guardian that the deal might grant unrestricted access for chicken imports, provided they meet hygiene standards.

Trade Secretary Douglas Alexander is leading the negotiations and is reportedly prepared to finalize the work initiated by the Conservative government. This deal is viewed as a more concrete prospect than the agreement with India, which was signed two weeks prior. Alexander is anticipated to meet with his counterpart for final approval.

Former Trade Secretary Anne-Marie Trevelyan had previously assured Parliament that the deal “would not come at the expense of human rights.”

Members of Parliament had noted precedents for including rights issues in trade agreements, citing the New Zealand deal, which features a chapter with commitments ensuring indigenous peoples play a role in their country’s future development.

Nick Thomas-Symonds, who was the shadow trade secretary at the time, stated while in opposition, “It is crucial that human rights, women’s rights, and workers’ rights are incorporated into the UK’s trade negotiations.”

However, during recent discussions under the Labour government, House of Lords Trade Minister Baroness Jones asserted that while the UK is a “leading advocate for human rights globally,” this advocacy is pursued separately from free trade agreement negotiations. Speaking in the House of Lords last year, she commented, “While some aspects of trade policy can provide opportunities to address other issues in bilateral relationships, free trade agreements are generally not the most effective or targeted tool for advancing human rights issues.”

UAE Trade Minister Dr. Thani bin Ahmed al-Zeyoudi told Politico in 2023 that if the UK and other Western countries “want more market access and more business opportunities,” they should “soften” standard human and worker rights provisions in trade deals.

Government estimates indicate that trade with this bloc, the UK’s seventh-largest export market, is valued at approximately £59 billion annually. The trade agreement is projected to increase this trade by about 16%.

Sovereign wealth funds in Gulf countries, including Saudi Arabia and the UAE, are among the largest foreign investors in the United Kingdom.