U.S. Commerce Secretary Howard Lutnick said on Tuesday trade talks with China were going well as the two sides met for a second day in London, seeking a breakthrough on export controls that have threatened a fresh rupture between the superpowers.
Having agreed to step back from a full-blown trade embargo at a first round of talks in Geneva in May, the two sides are now seeking agreement after they accused each other of trying to throttle supply chains with a raft of export controls.
White House economic adviser Kevin Hassett said on Monday that the U.S. could lift recently imposed export controls on goods such as semiconductors if China sped up the delivery of rare earths and magnets that are crucial to its economy.
The blow-up over rare earths, which has sparked alarm in boardrooms and factory floors around the world, came after last month’s preliminary deal in Geneva to cut tariffs, which eased investor fears that a trade war would lead to a global slowdown.
“(Talks went on) all day yesterday, and I expect (them) all day today,” Lutnick told reporters. “They’re going well, and we’re spending lots of time together.”
Business Matters: Global stock markets surge as U.S. and China reach 90-day ‘breakthrough’ trade truce
Trump’s shifting tariff policies have roiled global markets, sparked congestion and confusion in major ports, and cost companies tens of billions of dollars in lost sales and higher costs.
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But markets have made up much of the losses they endured after Trump unveiled his sweeping “Liberation Day” tariffs in April, aided by the reset in Geneva between the world’s two biggest economies.
The second round of U.S.-China talks, which followed a rare phone call between Trump and Chinese President Xi Jinping last week, comes at a crucial time for both economies.
Customs data published on Monday showed that China’s exports to the U.S. plunged 34.5% in May, the sharpest drop since the outbreak of the COVID pandemic.
While the impact on U.S. inflation and its jobs market has so far been muted, tariffs have hammered U.S. business and household confidence and the dollar remains under pressure.
The talks have been led by U.S. Treasury Secretary Scott Bessent, Lutnick and U.S. Trade Representative Jamieson Greer, with the Chinese contingent helmed by Vice Premier He Lifeng.
The two sides met for almost seven hours on Monday and resumed just before 1000 GMT on Tuesday, with both expected to issue updates later in the day.
The inclusion of Lutnick, whose agency oversees export controls for the U.S., indicates just 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.
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In May, the U.S. responded by halting shipments of semiconductor design software and chemicals and aviation equipment, revoking export licenses that had been previously issued.
Hassett said he expected any export controls from the U.S. to be eased and rare earths released in volume once the two sides had shaken hands in London.
But he said any easing would not include the “very, very high-end Nvidia stuff,” referring to Nvidia’s NVDA.O most advanced artificial intelligence chips that have been blocked from going to China over concerns about potential military applications.
“I’m talking about possible export controls on other semiconductors which are also very important to them,” he said.
—Additional reporting by Sachin Ravikumar. Writing by Kate Holton. Editing by David Evans and Mark Potter
