The US-China trade truce might have a bumpier-than-expected road to a long-lasting deal
Two temporary deals
The US and China have signed two temporary trade agreements, but the battle between the giants has mutated from a feud over fentanyl and trade deficits to a clash of export protections.
Extension after August deadline
According to Reuters, US officials have signaled they might extend the reduced tariffs for China for another 90 days, given that a more permanent agreement might take longer than that.
Rare earth magnets and chips
The details of a US cap on advanced AI chip exports to China and a Chinese limit on rare earth exports have complicated the talks. Both countries cite national security concerns.
Six-month licenses
The most recent temporary deal, signed in London on June 11, included a Chinese promise to grant companies permits to export rare earths to the US. However, the licenses only last six months.
Military components
Reuters said that the list of rare earths also excluded some key components necessary for US military development, like samarium. The deal includes fast-tracking permits only for non-military companies.
Relief for the world
While a deal between the US and China is excellent news for global markets, the truce conditions also provide uncertainty over a more permanent deal and when it might materialize.
Who suffered more?
President Trump said children in America might "have two dolls instead of 30 dolls," which earned him the nickname "two doll Don" on social media. Despite this hardship, Trump claimed that China would suffer more from the trade war.
A tough negotiation
He was wrong. The goal of his tariffs was unclear, and China leveraged a market it dominates, rare earth minerals, in the negotiations. Still, the most telling fact was China's export numbers.
A drop in exports to the US
According to the Wall Street Journal, April exports from China to the US dropped 21% compared to 2024. The White House's high tariffs stopped part of the flow of goods between the countries.
An overall growth
However, China's exports grew 8.1% during that month compared to last year. The American losses were offset by an increase in goods exchanges with other regions.
New destinations
The WSJ said China's exports to Southeast Asia grew 21%. They increased by 16% to Latin America, 25% to Africa, and 8.3% to the European Union. The tariffs quickly shifted global markets.
Overall US exports
According to the WSJ, a March surge in exports to the US, likely related to an import spree to avoid tariffs, compensated some of the losses.
Trade deficit
President Trump has not given up on his quest for a more even trading relationship with China. After they signed the London truce, he said both nations would work to open more space for US companies in the Chinese market.
A one-way street
However, the newspaper said China’s import numbers have flattened. The country views commerce as exports and not imports, so it is becoming a one-way street for all international trade partners, including the US.
