Trade War Monitor, June 30: China-U.S. Trade Deal Is Almost There

The recent developments in China’s global trade relations reveal both progress and ongoing friction with major economic partners. China and the United States have made notable headway in their trade talks. Both sides announced that they had reached an agreement on implementing the trade framework negotiated earlier in London. As part of this agreement, China will expedite rare earth exports to the United States, while the U.S. will lift several restrictive measures previously imposed on China. This indicates a significant move toward easing trade tensions and restoring aspects of economic cooperation between the world’s two largest economies [para. 1]. The Chinese Ministry of Commerce confirmed that both countries remain committed to this framework and that details of the arrangement have been finalized [para. 10][para. 11][para. 12].

Conversely, China’s trade relationship with the European Union is becoming strained, especially regarding public procurement in the medical device sector. The EU recently banned Chinese companies and products from participating in government tenders for medical devices exceeding 5 million euros ($5.8 million). In response, China accused the EU of unilaterally creating new trade barriers and threatened retaliatory measures, criticizing the EU’s actions as damaging to Chinese interests and fair competition. Nevertheless, China also stated its readiness for dialogue and consultation to stabilize and potentially resolve these tensions [para. 2][para. 20][para. 21][para. 22][para. 23].

Domestically, Chinese industrial companies are facing headwinds. Profits for these firms fell 9.1% year-on-year in May and decreased 1.1% over the first five months of the year. Weak demand and falling prices are the main culprits behind this decline. Several industrial sectors performed poorly, although the equipment manufacturing sector remained a bright spot due to government incentives for equipment upgrades and consumer goods replacement programs [para. 3][para. 5][para. 6].

A closer look at economic indicators reveals that while China’s official manufacturing purchasing managers’ index (PMI) rose to 49.7 in June, showing tentative signs of improvement—possibly linked to easing U.S. trade tensions—the overall recovery is uneven. Large manufacturers experienced growth, but small firms continued to contract. Despite increased production and domestic orders, both new export orders and employment figures kept declining [para. 7][para. 8].

Rare earth minerals remain a critical point of strategic interest for both the U.S. and China; these elements are vital to national security and global supply chains. The current agreement over rare earth exports marks a rare point of controlled convergence amid broader strategic rivalry. Meanwhile, the U.S., Canada, and Australia are moving to rebuild their own rare earth supply chains to reduce dependence on China [para. 13][para. 14][para. 15].

In U.S.-China tech relations, President Donald Trump—now the president following his 2024 election victory over Kamala Harris—announced progress on the bid to force the sale of TikTok to American buyers, stating that a deal has been found involving “a group of very wealthy people,” though specifics are pending and will require Beijing’s approval [para. 1][para. 31][para. 32].

On another front, Brazil’s soybean exports to China surged by 37.5% in May, reaching 12.11 million metric tons. This was attributed to strong Chinese purchasing and favorable weather conditions in Brazil, resulting in robust supply and competitive pricing [para. 34][para. 35].

Altogether, these developments highlight the dynamic and sometimes volatile landscape of international trade involving China, marked by both strategic collaboration and growing friction with key global partners [para. 4].