After two days of negotiations in London, the U.S. and China have backed off on the trade war, cooling tensions but not offering a clear resolution. Officials announced they agreed on a framework to implement the Geneva consensus reached last month. Said framework still has to go to Presidents Trump and Xi for approval. The U.S. previously accused China of violating the consensus by not shipping rare earths.

Notably, part of this truce includes removing China’s export restrictions on rare earths, a key component of the trade war. The U.S. won’t remove its own restrictions on exporting semiconductors.

Commerce Secretary Lutnick said that U.S. retaliation against China’s rare earth restrictions would be rolled back “in a balanced way.” Some of those measures included throttling exports for chemicals and airplane parts, as well as proposing a ban on Chinese exchange students.

Trump announced on social media this morning that the deal with China is done. However, markets are slightly down this morning. The lack of a positive reaction could mean that this was already priced in – or, that markets don’t think the end is actually here. Another meeting between the leaders or proxies has not been announced.

Keep in mind, the White House is also appealing a May federal court decision that declared many of Trump’s tariffs illegal. The tariffs are allowed to stay in place while the case continues, but if upheld, that could create a significant issue in negotiations.

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