US-China trade truce 2.0? Trump says deal is ‘done’ with fixed 55% tariff regime

A fragile US-China tradetruce appears to be back on track after months of brinkmanship, retaliatory tariffs and curbs on critical exports.

US President Donald Trump has now declared that a new deal with China has been finalised the pending formal approval from Chinese President Xi Jinping.

The agreement, reached after two days of intense negotiations in London, includes key concessions on rare earth exports, provisions for Chinese students to study in the US, and the imposition of fixed tariffs, marking a potential de-escalation in a trade war that has rattled global markets for months.

Trump says the deal is done

Speaking at Washington’s Kennedy Center on Wednesday, Trump told reporters, “We made a great deal with China. We’re very happy with it. We have everything we need, and we’re going to do very well with it. And hopefully they are too,” as quoted by Reuters

The president also confirmed the breakthrough via a post on his social media platform Truth Social: “Our deal with China is done, subject to final approval with President Xi and me. Full magnets, and any necessary rare earths, will be supplied, up front, by China. Likewise, we will provide to China what was agreed to, including Chinese students using our colleges and universities (which has always been good with me!). We are getting a total of 55% tariffs, China is getting 10%.”

Trump’s comments followed what officials described as “marathon” negotiations in London, building on a preliminary framework struck in Geneva last month. US Commerce Secretary Howard Lutnick called the London agreement the move that “put meat on the bones” of that earlier deal.

According to a senior White House official, the 55 per cent tariff level is a composite of existing tariffs: 25 per cent from Trump’s first term, 20 per cent in response to alleged fentanyl-related trade channels through China, and a baseline 10 per cent reciprocal tariff on all imports.

What about rare earth minerals?

One of the most significant components of the new deal is China’s commitment to remove export restrictions on rare earth minerals and magnetic components materials critical for manufacturing electric vehicles, smartphones, defence systems and semiconductors.

This move marks a reversal from Beijing’s earlier stance. In February, China’s Ministry of Commerce imposed tight controls on exports of rare earths such as terbium, dysprosium and gadolinium, citing national security concerns.

The US accused China of leveraging these controls as a geopolitical weapon, given its dominant position, holding roughly 36 per cent of global rare earth reserves and nearly 70 per cent of refining capacity.

The curbs threatened to choke the US tech and defence supply chains, especially after the US imposed its own export bans on semiconductor design software, AI chips and other dual-use technologies.

While Trump has made it clear that the new agreement does not ease US restrictions on AI chips, Treasury Secretary Scott Bessent told lawmakers: “There is no quid pro quo in terms of chips for rare earths,” as quoted by Reuters.

Lutnick described the deal on rare earths as “balanced,” but stopped short of detailing which specific minerals or volumes would be resumed. A final implementation mechanism, both sides say, will be triggered after Trump and Xi give the green light.

US-China trade war timeline

The current deal comes after months of escalations and uneasy pauses that have defined President Trump’s second-term approach to Beijing.

In February 2025, Trump reignited the trade war by issuing an executive order that imposed a 10 per cent blanket tariff on all Chinese imports. He also scrapped the de minimis exemption for small parcels—targeting what he described as “fentanyl pipelines” using e-commerce routes. In retaliation, China imposed tariffs on key US exports including coal, LNG, crude oil, and vehicle components.

It also introduced new export controls on strategic rare earths such as terbium, dysprosium, and gadolinium. By March 2025, the confrontation had escalated.

Trump increased tariffs to 20 per cent and then up to 54 per cent under what he called the “Liberation Day” order. Beijing matched every move, with tariffs on US goods climbing to as high as 125 per cent. The standoff intensified when China filed a formal complaint against the US at the World Trade Organization (WTO).

Both sides also tightened export controls on semiconductors, artificial intelligence tools, and critical minerals, pushing global supply chains into deeper uncertainty.

In May 2025, negotiators reached a fragile truce in Geneva. Tariffs were slightly rolled back and both sides agreed to a 90-day moratorium on new trade measures. But the ceasefire was short-lived. Trump soon accused China of failing to deliver on its commitments, particularly in resuming rare earth shipments. With mutual trust eroding, tensions flared once more.

A turning point came in June 2025, after a 90-minute phone call between Trump and Chinese President Xi Jinping on June 5. That dialogue paved the way for high-level talks in London from June 9–10, where both delegations finalised a framework agreement.

On June 11, Trump publicly declared the deal “done,” pending formal sign-off from Xi, a move that may yet stabilise one of the most volatile economic relationships in the world.

Uncertainty remains

Despite the celebratory tone from Trump, analysts warn that critical details are still missing. “It’s a done deal, according to President Trump, but we haven’t seen any details, which is why I think the market is not reacting to it yet,” said Oliver Pursche, a senior adviser at Wealthspire Advisors, as quoted by Reuters.

The World Bank has already slashed its 2025 global growth forecast to 2.3 per cent, citing higher tariffs and policy unpredictability. Even with a framework in place, Trump’s history of abrupt policy changes has kept investors and trading partners wary.

Whether this new deal holds or triggers another round of tariff brinkmanship will depend on how both sides follow through in the weeks ahead.

(With inputs from the agencies)