The United States and China have signed a trade deal that halts tariff hikes and resumes rare earth exports, triggering immediate market reactions and heightening geopolitical tension.
At a Glance
- The agreement formalizes a Geneva‑based framework reached in May.
- U.S. tariffs on Chinese goods will rise to 55%, while China will lower its rate to 10%.
- China will resume exports of rare earth minerals vital to U.S. defense and tech industries.
- Chinese students will retain access to American universities under the deal.
- Final approval is required from President Biden and President Xi Jinping.
Framework Reconfirmed in Geneva and London
In May, negotiators reached a truce in Geneva that paused escalating tariffs for 90 days—30% for U.S. duties and 10% for Chinese levies—forming the backbone of the current agreement, later reaffirmed in London earlier this month. President Trump announced the pact was “done,” claiming both sides had “further confirmed the details of the framework” during these follow-up sessions.
The finalization of terms was confirmed by Commerce Secretary Howard Lutnick, who said the deal was “signed and sealed” two days prior to Trump’s declaration. The framework formalizes what had been an informal understanding, anchoring a delicate balance ahead of a possible re-election bid and Beijing’s domestic industrial reforms.
Watch a report: U.S.–China Rare Earths and Tariffs Explained
Tariff Shifts and Rare Earth Access
The deal imposes sharp changes to tariff structures. Under the agreement, U.S. tariffs on Chinese goods will increase to 55%, including new levies on products tied to fentanyl trafficking. Meanwhile, China will lower its retaliatory tariffs to 10%, easing pressure on American exporters.
Beijing will also lift restrictions on exports of rare earth elements—strategic resources critical to U.S. defense systems, electric vehicles, and telecommunications infrastructure. This move follows months of backchannel negotiations and rising fears in Washington over mineral dependency.
In a notable concession, the United States will allow Chinese students to retain access to American universities. This provision, long seen as a diplomatic flashpoint, is now positioned as a soft-power lever embedded within a trade framework rather than a separate immigration policy issue.
Legal Uncertainty and Structural Gaps
Despite the breakthrough, legal and strategic complications loom. Former Commerce Secretary Wilbur Ross called the deal “far from comprehensive,” warning it sidesteps core conflicts such as intellectual property enforcement and semiconductor access.
A key vulnerability is legal: a federal appeals court will rule on July 31, 2025, whether Trump’s use of IEEPA to impose tariffs is constitutional—a decision that could retroactively nullify parts of the deal.
Moreover, analysts caution that China’s rare earth concessions may be limited in duration. While the export ban has been formally lifted, Beijing has not committed to unrestricted long-term shipments. Observers speculate that approvals may be capped at six months, giving China continued leverage in future negotiations.
Markets reacted with restrained optimism. Equities ticked upward following the announcement, but volatility remains high amid broader uncertainty over enforcement and compliance. Investors are now bracing for the July 31 court decision, which could recalibrate the entire trade equation.
