US-China Trade Talks Convene in London Amid Tensions Over Rare Earth Exports and Technology Restrictions
Introduction
High-level trade negotiations between the United States and China commenced in London on Monday, June 9, 2025, marking a critical juncture in efforts to preserve a fragile truce between the world’s two largest economies.
The talks, featuring Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer for the US, alongside Chinese Vice Premier He Lifeng, aim to address escalating tensions over rare earth mineral exports, advanced semiconductor restrictions and other trade disputes that have emerged since a preliminary agreement was reached in Geneva last month.
The discussions occur against a backdrop of significant economic strain.
Chinese exports to the US plummeted by 34.5% in May compared to the previous year, representing the steepest decline since the onset of the COVID-19 pandemic.
FAF, Britain.Forum analyses the negotiations represent a crucial test of whether both nations can move beyond their current standoff and establish a more stable framework for economic cooperation.
Background and Genesis of the London Talks
The London trade talks emerged from a complex web of escalating trade tensions that had brought the world’s two largest economies to the brink of a comprehensive trade war.
The immediate catalyst for these discussions was a 90-minute telephone conversation between President Donald Trump and Chinese President Xi Jinping on Thursday, June 5, 2025.
This conversation marked their first publicly announced communication since Trump’s return to the presidency.
Trump characterized this call as reaching a “very positive conclusion” and announced via his Truth Social platform that trade discussions would proceed in London. According to Chinese state media, Xi emphasized the need to “correct the course of the big ship of Sino-US relations” and urged both nations to “steer well and set the direction.”
The foundation for these talks was established through previous negotiations in Geneva in May 2025, where both countries reached a preliminary agreement to suspend most tariffs exceeding 100% for 90 days.
This Geneva Accord temporarily reduced US tariffs on Chinese goods from 145% to 30% while China lowered its retaliatory tariffs on American products.
However, the fragile truce began to unravel almost immediately after its announcement on May 12, with both sides accusing each other of violating the agreement’s terms.
The deteriorating situation prompted urgent diplomatic intervention, as trade disputes expanded beyond traditional tariff battles to encompass critical technology transfers, rare earth mineral exports, and visa restrictions for Chinese students studying in American universities.
These escalating tensions had begun to manifest in severe economic consequences, with trade data showing dramatic declines in bilateral commerce and growing concerns about global supply chain disruptions.
Delegation Composition and Leadership
The composition of both delegations reflects the high stakes and comprehensive nature of the issues under discussion.
The American team is led by three of the Trump administration’s most senior economic officials, demonstrating the priority the White House places on these negotiations.
Treasury Secretary Scott Bessent brings expertise in financial markets and monetary policy, while Commerce Secretary Howard Lutnick’s presence is particularly significant given his agency’s oversight of export controls, suggesting that technology transfer restrictions will feature prominently in the discussions.
Trade Representative Jamieson Greer completes the US triumvirate, bringing specialized knowledge of international trade law and negotiations.
China’s delegation is headed by Vice Premier He Lifeng, who serves as Beijing’s principal economic negotiator and has extensive experience in high-level international trade discussions.
He Lifeng previously led the Chinese team during the Geneva talks in May and is widely respected within the Chinese government for his diplomatic skills and economic expertise.
The Chinese Foreign Ministry announced that He would be in the United Kingdom from June 8 to June 13, indicating that these discussions could potentially extend beyond the initially planned single day.
The selection of these particular officials reflects the breadth of issues that both sides expect to address during the London talks.
The inclusion of Commerce Secretary Lutnick, who was notably absent from the Geneva negotiations, signals that the US is prepared to discuss export control modifications, which represents a key Chinese demand.
Similarly, He Lifeng’s continued leadership of the Chinese delegation suggests Beijing’s commitment to maintaining continuity with the Geneva framework while pushing for resolution of outstanding disputes.
Core Issues Under Discussion
The central focus of the London negotiations revolves around China’s export restrictions on rare earth minerals and related products, which have become a critical leverage point in the broader trade dispute.
China maintains dominance over approximately 70% of global rare earth production and controls up to 99.9% of the processing capacity for seven specific rare earth elements that are essential for electronics, automotive manufacturing, and defense systems.
In April 2025, Beijing implemented a new licensing system requiring export permits for these critical materials, effectively creating bottlenecks in global supply chains.
Recent customs data released on Monday revealed a 23% month-over-month increase in Chinese rare earth exports during May, though shipments remained below previous year levels.
The data showed that China exported 5,865 tons of rare earth minerals in May, bringing the year-to-date total to 24,827 tons, representing a 2.3% increase compared to the same period in the previous year.
However, these figures provide only a partial picture, as they exclude rare earth products such as high-value magnets used in electric motors and hard drives, with that data scheduled for release on June 18.
The semiconductor and advanced technology sector represents another critical area of contention that negotiators must address.
Since the Geneva agreement, the US has imposed additional restrictions on Chinese access to advanced microchips and suspended sales of jet engine-related technologies to China.
The Trump administration has also threatened to revoke visas for Chinese students associated with the Communist Party or studying in sensitive fields.
China has responded by arguing that these measures violate the spirit of the Geneva accord and represent a breach of good faith in the negotiating process.
Trade imbalances constitute a third major area requiring attention during the London talks.
Official data released Monday showed Chinese exports to the US fell 12.7% month-over-month in May, with China shipping $28.8 billion worth of goods compared to $33 billion in April.
This dramatic decline reflects the ongoing impact of trade tensions and suggests that both economies are suffering significant commercial disruption as a result of the dispute.
Recent Tensions and the Geneva Agreement Framework
The Geneva agreement of May 2025 represented a significant breakthrough in US-China trade relations, temporarily halting what had become an increasingly destructive cycle of retaliatory tariffs.
The accord established a 90-day suspension period for most tariffs that had reached punitive levels exceeding 100%, providing both sides with breathing room to pursue more comprehensive negotiations.
At its peak, US tariffs on Chinese goods had reached 145%, while Chinese retaliatory measures had imposed duties of 125% on American products.
However, the implementation of the Geneva framework quickly encountered significant obstacles that threatened to derail the entire process.
The US accused China of deliberately slowing the approval process for rare earth exports, arguing that Beijing was using bureaucratic delays to maintain leverage in ongoing negotiations.
American officials expressed frustration that despite the agreement, critical mineral shipments had not returned to pre-April levels, creating ongoing supply chain disruptions for US manufacturers.
China responded to these accusations by asserting that the US had violated the Geneva agreement through its continued imposition of technology export restrictions and visa limitations on Chinese students.
Beijing particularly objected to the Commerce Department’s May 13 notice regarding Huawei’s Ascend AI chips, which suggested that using these products might violate US export regulations due to concerns about embedded American technology.
Chinese officials characterized these actions as evidence of Washington’s unwillingness to honor its commitments under the Geneva framework.
The deteriorating atmosphere reached a critical point in late May when President Trump posted on social media that China had “TOTALLY VIOLATED AGREEMENT WITH US,” escalating tensions and raising doubts about the viability of continued negotiations.
This public criticism prompted Chinese officials to respond with their own complaints about American non-compliance, creating a cycle of mutual recrimination that threatened to undermine the entire diplomatic process.
The subsequent Trump-Xi phone call was widely viewed as an attempt to prevent complete breakdown of the negotiating framework and establish conditions for productive discussions in London.
Economic Impact and Market Response
The ongoing trade dispute has generated substantial economic disruption for both the US and Chinese economies, with effects rippling throughout global markets and supply chains.
Chinese export data released Monday provided stark evidence of the commercial damage, showing that shipments to the US declined by 34.5% year-over-year in May, marking the most severe contraction since the early stages of the COVID-19 pandemic in February 2020.
This dramatic reduction in bilateral trade flows represents billions of dollars in lost commercial activity and highlights the urgent need for resolution of the current impasse.
US economic indicators have also reflected the strain of prolonged trade uncertainty, with first-quarter GDP data showing contraction due to a record surge in imports as American businesses and consumers attempted to front-load purchases before anticipated price increases.
The trade war has significantly impacted business and household confidence, though economists note that inflation effects have remained relatively muted and labor market resilience has persisted through the early stages of the conflict.
However, analysts warn that more significant economic disruption may become apparent during the summer months if negotiations fail to produce meaningful progress.
Global markets have responded with cautious optimism to news of the London talks, with Asian stock markets posting gains overnight ahead of the negotiations.
Shares rose across major markets from Hong Kong to Tokyo following confirmation of the Trump-Xi phone call and announcement of resumed negotiations.
However, European markets displayed greater restraint, with the FTSE 100 declining 0.1% in early trading, suggesting that investors remain skeptical about the prospects for a comprehensive resolution.
The rare earth mineral shortage has created particularly acute challenges for manufacturing industries worldwide, with factories in the United States, Europe, and Japan rapidly depleting their inventories of essential materials.
Automotive manufacturers have expressed alarm about potential production halts if rare earth supplies are not restored, while electronics companies face similar constraints in their production planning.
The severity of these supply chain disruptions has elevated rare earth exports to the top of the London agenda and increased pressure on both sides to find mutually acceptable solutions.
UK’s Facilitative Role
The United Kingdom has assumed a carefully calibrated role as facilitator for the London talks, providing logistical support and venue arrangements while maintaining strict neutrality regarding the substantive negotiations.
British officials have emphasized that while they are hosting the discussions, they are not participating directly in the talks themselves and will not influence the content or outcomes of the negotiations.
This approach reflects the UK’s broader strategy of positioning itself as a bridge between major economic powers while avoiding entanglement in their specific disputes.
The choice of London as the venue appears strategically advantageous for both parties, providing neutral ground that avoids the political symbolism associated with holding talks in either Washington or Beijing.
Reports indicate that the negotiations are taking place at Lancaster House, an ornate government building that has historically served as a venue for important diplomatic meetings.
The specific location was kept confidential until the talks commenced, reflecting the sensitive nature of the discussions and both sides’ desire to minimize external pressure or media speculation.
UK government statements have carefully balanced support for free trade principles with recognition of the legitimate concerns of both negotiating parties.
A government spokesperson noted that “We are a nation that champions free trade and have always been clear that a trade war is in nobody’s interests, so we welcome these talks”.
This position allows Britain to demonstrate its commitment to multilateral trade while avoiding taking sides in the specific disputes between the US and China.
The timing of the talks has also provided an opportunity for China to strengthen its bilateral relationship with the UK, with Vice Premier He Lifeng meeting separately with Chancellor Rachel Reeves during his visit to London.
Chinese state media reported that He called for deeper financial and economic cooperation with Britain and urged both countries to maintain stable relations. This parallel diplomatic engagement demonstrates China’s broader strategy of building relationships with key allies while managing its primary dispute with the United States.
Conclusion
The London trade talks represent a critical inflection point in US-China economic relations, with potential implications extending far beyond bilateral trade flows to encompass global supply chains, technological innovation, and international economic stability.
The negotiations face substantial challenges given the breadth of issues under discussion, ranging from immediate concerns about rare earth mineral exports to fundamental questions about technology transfer, trade imbalances, and the future structure of international commerce.
Success will require both sides to move beyond the mutual accusations that have characterized recent weeks and demonstrate genuine commitment to implementing the Geneva framework.
The economic stakes could not be higher, with mounting evidence that the current trade dispute is inflicting significant damage on both economies and creating uncertainty that extends throughout global markets.
The dramatic decline in Chinese exports to the US, combined with supply chain disruptions affecting critical industries worldwide, underscores the urgent need for progress in these negotiations.
Failure to achieve meaningful breakthrough could trigger a return to escalating tariff wars and potentially precipitate broader economic disruption at a time when global growth remains fragile.
Looking ahead, the most realistic outcome may be a limited agreement that addresses immediate concerns about rare earth exports and provides a framework for ongoing dialogue, rather than a comprehensive resolution of all outstanding issues.
Analysts suggest that fundamental differences in economic philosophy and strategic objectives between the two countries make sweeping agreements unlikely in the near term.
However, even modest progress in London could help stabilize the relationship and create space for more ambitious negotiations in the future, potentially preventing the complete breakdown of economic cooperation between the world’s two largest economies.
