The US and China agree to restore their recent trade truce

Following a brief timeout, the world’s two biggest economies shook hands and are playing nice again.

American and Chinese negotiators agreed after trade negotiations in London to revive a trade truce from last month and de-escalate recent economic tensions over alleged violations of that deal, President Trump announced yesterday.

How we got here: Last month, US and Chinese leaders reached a trade deal reducing most of the tit-for-tat tariffs they had imposed on each other in the previous weeks. But both sides said the other was violating that deal by using nontariff means to throttle exports.

• The US accused China of slow-walking export licenses for rare-earth minerals and magnets, causing delays and shortages for US manufacturers of advanced tech like cars, laptops, cellphones, and military aircraft.
• China took issue with new US restrictions on certain tech exports to China—including jet engines and chip-design software—as well as the Trump admin’s plan to revoke all Chinese students’ visas.

Back to square one

US and Chinese officials say the new framework essentially restores the trade deal they agreed to last month. This means US tariffs on China will fall to 55% from 145% previously (~20% pre-trade war), while Beijing’s tariffs will fall to 10% from 125% (~20%), according to Trump.

• The new agreement also calls for Beijing to ease its restrictions on rare-earth minerals and magnets for six months.
• On the flip side, the US will relax its restrictions on the sale of jet engines and ethane to China, and rescind restrictions on Chinese student visas—though export controls on advanced chips will remain.

Looking ahead…The deal still requires final approval from President Trump and Chinese President Xi Jinping before it takes effect. Under its terms, reduced tariffs would remain for 90 days while both sides work towards a broader trade deal.