President Donald Trump announced a breakthrough in US-China trade negotiations, declaring that a new trade agreement has been finalized, subject to final approval from Chinese President Xi Jinping. According to Trump, the deal includes China’s commitment to supply the United States with essential magnets and rare earth materials, a critical issue that had previously stalled talks. In return, the US will permit Chinese students to continue their studies at American colleges and universities, a move welcomed by both sides. The agreement also outlines tariff arrangements, with the US imposing tariffs totaling 55% on Chinese imports, while China will impose a lower 10% rate on American goods. Trump views this imbalance as a win for the US economy and manufacturing sector, stating that the relationship between the two countries is “excellent”.
The US-China trade tensions have been escalating since Trump’s second inauguration, with both countries imposing significant tariffs on each other’s goods. In April, Trump unveiled his “Liberation Day” tariffs, imposing an additional 34% tariff on Chinese imports, which China swiftly retaliated against with matching tariffs on US products. The tit-for-tat escalations intensified rapidly, with tariffs soaring to as high as 125% on both sides, severely disrupting global supply chains and increasing economic uncertainty worldwide.
Rare earth elements have become a critical flashpoint in this trade conflict, with China dominating about 90% of the global rare earth supply and refining capacity. The recent agreement includes China’s commitment to resume supplying rare earths and magnets to the US market, easing a major bottleneck for American industries and defense contractors. US Commerce Secretary expressed optimism that resolving the rare earth issue would help stabilize trade talks and reduce economic uncertainty.
The provision to allow Chinese students to continue their studies in the US is seen as crucial for maintaining people-to-people connections, which underpin broader diplomatic and economic relations between the two countries. Chinese students represent one of the largest groups of international students in the US, contributing around $14 billion annually through tuition and living expenses. The agreement’s impact on the global economy, trade dynamics, and the relationship between the US and China will be closely monitored in the coming weeks and months.
