U.S. and China Resume Critical Trade Talks in London Amid Rising Tensions Over Rare Earth Exports

 High-level trade negotiations between the United States and China are set to continue for a second day in London on Tuesday, as both sides seek to defuse tensions over export controls on rare earth materials—essential components in industries ranging from electric vehicles to aerospace and defense.

The talks, which follow a preliminary trade agreement reached in Geneva last month, are seen as a crucial opportunity to stabilize a fragile détente between the world’s two largest economies. That optimism, however, has been tempered by renewed accusations from Washington that Beijing is obstructing the export of key materials critical to high-tech manufacturing and national security sectors.

The meeting takes place at a pivotal juncture. New customs data reveals that China’s exports to the United States plummeted 34.5% in May—the sharpest year-on-year decline since February 2020, when global trade was disrupted by the onset of the COVID-19 pandemic. While the broader impact on U.S. inflation and employment has so far remained limited, pressure on the dollar and concerns over supply chain vulnerabilities persist.

Discussions began Monday at London’s historic Lancaster House, where officials focused on unresolved issues from the Geneva deal. Talks are expected to resume early Tuesday, with statements from both delegations anticipated later in the day.

Leading the U.S. delegation are Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and U.S. Trade Representative Jamieson Greer. On the Chinese side, Vice Premier He Lifeng is heading the discussions. The presence of Secretary Lutnick—whose agency regulates U.S. export controls—underscores the growing strategic importance of rare earth elements in global trade dynamics.

China currently maintains a near-monopoly on the production of rare earth magnets, a vital component in electric vehicle motors and various high-tech systems. Lutnick's absence from the earlier Geneva negotiations highlights the evolving complexity of trade discussions, particularly in sectors with deep geopolitical implications.

The London round comes just days after a phone call between President Donald Trump and Chinese President Xi Jinping—their first direct conversation since Trump's inauguration in January. Following the call, Trump announced that Xi had agreed to resume rare earth shipments to the United States. Reports by Reuters suggest that China has since granted temporary export licenses to suppliers catering to America’s top three automakers.

Still, the broader context remains fraught. The Trump administration’s unpredictable tariff policies have roiled global markets, disrupted shipping lanes, and imposed significant costs on multinational businesses. Both governments now face mounting pressure—from markets and domestic industries alike—to provide clarity and avoid further escalation.

The outcome of the current round of talks could shape the trajectory of U.S.-China economic relations for months to come, particularly in sectors reliant on secure access to advanced materials.