United States and China Aim to Restore Trust with a Meeting on Tariffs in London

The first meeting, last month in Geneva, marked the thaw. The one in London, which began this Monday and will continue until Tuesday, will be the time to check the water temperature.

Two high-level delegations sent by the U.S. and Chinese governments are meeting at Lancaster House, in the heart of St. James (the historic center of power) in the British capital, to try to resolve the bilateral dispute over tariffs and, above all, over China’s supply of rare earths, essential for the manufacture of all kinds of technological products, of which Beijing maintains an almost global monopoly. The tensions between the two giants over the restrictions China imposes on the export of these materials threaten not only the economic relationship between the two countries but also global supply chains and worldwide growth.

Representing Washington are U.S. Treasury Secretary Scott Bessent and Jamieson Greer, International Trade Representative of the Trump Administration, who were also in Switzerland. They are joined this time by Secretary of Commerce Howard Lutnick, whose department is responsible for U.S. export controls, indicating the significance the discussions have gained.

From China, the envoy is again Vice Premier He Lifeng, the country’s economic czar and a trusted aide of Xi. He arrived in London on Sunday, where he has already met with Economic Minister Rachel Reeves, and is expected to stay there until Thursday.

During his meeting with Reeves, He Lifeng urged the British government to maintain and deepen the economic and financial cooperation between the two countries, according to the Chinese public broadcaster CCTV.

The Labor government, seeking to restart its relations with Beijing while finalizing a trade agreement with the U.S. administration, has seized the diplomatic opportunity to host the talks between the two powers.

The U.S. and Chinese representatives faced each other last month in Geneva amidst an increasingly heated trade dispute, with both countries raising their respective tariffs to impossible levels. Washington had decreed tariffs of 145% on Chinese imports, while Beijing responded with tariffs of 125% on American products. Ultimately, after those negotiations, tariffs on Chinese products dropped to 30%, while China reduced its tariffs on exports to its rival to 10%.

Rare earths were not explicitly mentioned, but part of the pact included that China would lift the non-tariff countermeasures it had imposed against its rival since April 2, the day Washington had increased tariffs against all countries, especially against the Asian giant. That lift included restrictions on the supply of rare earths and minerals to U.S. end-users.

However, the fragile agreement threatened to unravel two weeks ago when a combative Trump announced on social media—an affront to the Chinese method of negotiating, which is as closed-door as possible and certainly never through tweets—that he believed Beijing was not keeping its word. He did not specify how. But in the following days, it became clear: Washington accused Beijing of dragging its feet, or even halting, the flow of rare earth magnets and other minerals.

This incensed the Asian giant, which immediately retorted, accusing Washington of being the one who was blatantly violating the agreement. It pointed to the introduction of new restrictions on the export of semiconductors, the tools for manufacturing them, and other technological products. Trump also announced that “aggressive” restrictions would be imposed on Chinese student visas in the U.S.

In a call between the two leaders, Trump and Xi agreed to restore the flow of supplies. Kevin Hassett, director of the National Economic Council at the White House, explained this Monday that the talks in London aim to solidify that understanding and close it with a handshake. “The goal of the meeting is to ensure that they are serious,” Hassett declared to CNBC.

As a result of the trade war and the back-and-forth between the two global giants, the U.S. trade deficit with China plummeted in March, hitting a new low since the pandemic in April, at $17.185 billion. In that month, amidst a wave of tariffs, the U.S. imported Chinese products worth $25.378 billion and sold goods to the Asian giant worth $8.193 billion. Over the last decade, those levels had only been this low during the worst of the pandemic, in February and March 2020, when China locked down its economy and imposed a wave of closures and lockdowns to combat the virus.