Deal Reached: U.S. and China Agree to Framework in London Talks! Rare Earths for Chips? Understanding the Agreement and Its Risks

London, Tuesday evening, June 10, 2025. After two days of intense, closed-door negotiations, a measure of certainty has returned to the global market. U.S. Commerce Secretary Howard Lutnick announced that the U.S. and China have reached a "framework and implementation plan" to ease trade tensions. Does this signify the end of the trade war? What are the specific contents of this agreement? And what risks lie beneath the surface? This article provides a comprehensive analysis.

I.A Quick Look at the Agreement: What Was Achieved?

After a series of twists and turns, including the early departure of the U.S. Treasury Secretary, the negotiations ultimately yielded a substantive outcome.

• "Framework Agreement" Reached: U.S. Commerce Secretary Howard Lutnick confirmed, “We have reached a framework to implement the Geneva consensus”. This is an action plan designed to put the principles from the previous consensus into concrete practice.

• Core Issues: Lutnick indicated that the deal should resolve disputes between the two countries regarding "rare earths and magnets". This directly addresses the key U.S. concern about China's restrictions on the export of critical minerals.

• Next Step: Awaiting Leadership Approval: This is not a final agreement. Negotiators will now take the proposal back to their respective countries for final approval by their top leaders.

II. A Twisting 48 Hours

The path to this agreement was not smooth, and the process was filled with dramatic moments:

1. Day One (Monday): The two sides engaged in nearly seven hours of lengthy negotiations at Lancaster House in London, with a tense atmosphere.

2. Day Two (Tuesday): As talks entered a critical phase, unexpected news broke that a key member of the U.S. delegation, Treasury Secretary Scott Bessent, was leaving early to attend a congressional hearing, which at one point sparked speculation about a breakdown in talks.

3. The Final Breakthrough: Despite this development, the remaining U.S. officials continued the negotiations with the Chinese team, ultimately announcing the framework agreement on Tuesday evening, demonstrating a willingness from both sides to manage differences and reach a compromise.

III. Risks Beyond the Agreement: This Is Not the End

While the framework agreement is a significant positive development that offers the market a short-term reprieve, it is crucial to recognize that this is far from the end of the road. At least three major risks and uncertainties lie ahead.

• Risk 1: The Variable of Leadership Approval

  • The final enactment of the agreement is contingent on the approval of President Trump and President Xi. Before the final signatures are in place, anything could happen.

• Risk 2: Broader Trade Pressures Continue

  • This agreement is just one part of the vast U.S.-China trade relationship. The Trump administration's overall trade strategy has not changed. The White House has sent a "friendly reminder" to its trading partners that its 90-day pause on sweeping "reciprocal" tariffs is set to expire in early July. Furthermore, on June 4, the U.S. doubled tariffs on steel and aluminum from 25% to 50%. This indicates that the U.S. is maintaining a high-pressure stance on multiple fronts.

• Risk 3: Legal Uncertainty and the "Battle of the Century"

  • The Trump administration's most controversial comprehensive tariff policies are facing legal challenges within the United States, casting a shadow of legal risk over the stability of its trade policy.

  • More importantly, many analysts believe that the current trade friction is merely a symptom of a larger issue. Rebecca Harding, CEO of the Centre for Economic Security, stated bluntly that the U.S. and China "are locked in an existential battle at the moment". She believes this goes far beyond trade and is a comprehensive competition over data flows, AI, technology, and even national defense, calling it "a battle for the 21st century".

Summary and Outlook

The framework agreement reached in London is undoubtedly a successful case of crisis management, averting an immediate escalation of trade tensions. It sends a positive signal to the market, indicating that both sides are still willing to resolve issues through dialogue.

However, we must recognize that this agreement is more like a temporary shelter in a long-term strategic storm than a solid, permanent structure. In the short term, the global market's focus will be on whether the leaders of the two nations will approve this hard-won framework. But in the long term, the deep-seated competition between the U.S. and China in technology, economics, and global influence remains the true main storyline that will define the future world order.

This handshake is welcome, but the road ahead remains long.