US commerce secretary Howard Lutnick said trade talks with China were going well as the two sides met in London for a second day on Tuesday, looking for a breakthrough on export controls that have threatened a fresh rupture between the world’s two largest economies.
US and Chinese officials are trying to get back on track after Washington accused Beijing of blocking exports of rare earth minerals critical to America’s economy, straining ties after they had struck a preliminary deal in Geneva last month to step back from a full-blown trade embargo.
White House economic adviser Kevin Hassett said on Monday that the US was ready to agree to lift export controls on some semiconductors in return for China speeding up the delivery of rare earths and magnets.
The talks went on “all day yesterday” and were expected “all day today”, Mr Lutnick said. “They’re going well, and we’re spending lots of time together,” he said.
President Donald Trump‘s shifting tariff policies have roiled global markets, sparked congestion and confusion at major ports, and cost companies tens of billions of dollars in lost sales and higher costs.
Aided by the reset in Geneva, markets have made up some of the losses they endured after Mr Trump unveiled his sweeping “Liberation Day” tariffs in April.
The second round of the talks, which followed a rare phone call between Mr Trump and Chinese leader Xi Jinping last week, comes at a crucial time for both economies.
Customs data published on Monday showed that China’s exports to the US plunged 34.5 per cent in May, the sharpest drop since the outbreak of the Covid pandemic.
While the impact on US inflation and its jobs market has so far been muted, tariffs have hammered American business and household confidence and kept the dollar under pressure.
The talks have been led by Mr Lutnick, US treasury secretary Scott Bessent and trade representative Jamieson Greer, with the Chinese contingent helmed by vice premier He Lifeng.
The talks ran for almost seven hours on Monday and resumed just before 10am GMT on Tuesday, with both sides expected to issue updates later in the day.
The inclusion of Mr Lutnick, whose agency oversees export controls for the US is one indication of how central rare earths have become.
He did not attend the Geneva talks, when the countries struck a 90-day deal to roll back some of the triple-digit tariffs they had placed on each other.
China holds a near-monopoly on rare earth magnets, a crucial component in electric vehicle motors, and its decision in April to suspend exports of a wide range of critical minerals and magnets upended global supply chains and sparked alarm in boardrooms and factory floors around the world.
Kelly Ann Shaw, a White House trade adviser during Mr Trump’s first term and now a trade partner at the Akin Gump law firm in Washington, said she expected Beijing to reaffirm its commitment to lift retaliatory measures, including export restrictions, “plus some concessions on the US side, with respect to export control measures over the past week or two”.
But Shaw said she expected the US to only agree to lift some new export curbs, not longstanding ones such as for advanced artificial intelligence chips.
In May, the US ordered a halt to shipments of semiconductor design software and chemicals and aviation equipment, revoking export licences that had been previously issued.
