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Top US and Chinese officials were meeting in London yesterday to try and defuse a high-stakes trade dispute that has widened from tariffs to restrictions over rare earths, threatening a global supply chain shock and slower economic growth.
On the first of likely two days of talks, officials from the two superpowers were meeting at the ornate Lancaster House to try to get back on track with a preliminary agreement struck last month in Geneva that had briefly lowered the temperature between Washington and Beijing.
Since then the US has accused China of slow-walking on its commitments, particularly around rare earths shipments.
White House economic adviser Kevin Hassett said yesterday that the US team wanted a handshake from China on rare earths after Donald Trump said Xi Jinping had agreed to resume shipments in a rare call between the two presidents last week.
“The purpose of the meeting today is to make sure that they’re serious, but to literally get handshakes,” Hassett, director of the National Economic Council, told CNBC in an interview. He said the US would expect export controls to be eased and rare earths released in volume immediately afterwards.
The talks come at a crucial time for both economies, which are showing signs of strain from Trump’s cascade of tariff orders since his return to the White House in January.
Customs data showed that China’s exports to the US plunged 34.5 per cent year-on-year in May in value terms, the sharpest drop since February 2020, when the outbreak of the Covid-19 pandemic upended global trade.
In the US, business and household confidence has taken a pummelling, while first-quarter gross domestic product contracted due to a record surge in imports as Americans front-loaded purchases to beat anticipated price increases.
But for now, the impact on inflation has been muted, and the jobs market has remained fairly resilient, though economists expect cracks to become more apparent over the summer.
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