Trade talks between the United States and China resumed Monday afternoon at Lancaster House, the same historic venue where Mario Draghi delivered his “whatever it takes” speech in 2012. The high-stakes meeting — expected to stretch into Tuesday — aims to restore a fragile dialogue between the world’s two largest economies, following weeks of mounting tensions over tariffs, advanced technology exports and strategic supply chains.
“We expect that after the handshake in London, any export controls from the US will be eased and rare earths will be released by China,” Kevin Hassett, head of the White House’s National Economic Council, said in an interview with CNBC. It marked the clearest indication to date that the Trump administration is willing to compromise on a critical pillar of its industrial policy.
Leading the American delegation are Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick — who oversees controls on sensitive technologies. Across the table, China is represented by Vice Premier He Lifeng, a close ally of President Xi Jinping and a key figure in previous negotiations held in Geneva.
Sources close to both delegations said the opening round confirmed a shared political will to outline a common road map, though key obstacles remain. “They left too many things open to interpretation in Geneva,” said Josh Lipsky, director of international economics at the Atlantic Council. “Now they want to go back and actually put in writing what gets licensed, what gets permitted, and what doesn’t.”
At the center of the standoff lies China’s grip on rare earths — a group of 17 elements essential for everything from smartphones to electric vehicles and missile systems. Although deposits exist elsewhere, China controls 90% of global refining capacity. In April, Beijing imposed a new licensing regime requiring exporters to apply for case-by-case approval, slowing shipments to U.S. companies.
Washington has responded by tightening restrictions on semiconductor exports and signaling possible revocation of student visas for Chinese nationals.
Over the weekend, a spokesperson for China’s Ministry of Commerce said that “a certain number of compliant applications” had been approved, suggesting a potential softening of its stance. “China is willing to further enhance communication and dialogue with relevant countries regarding export controls to facilitate compliant trade,” the spokesperson added.
Meanwhile, the American Chamber of Commerce in China confirmed that several suppliers to U.S. firms — including General Motors, Ford, and Stellantis — were granted temporary six-month licenses. Still, many analysts believe the broader clampdown is here to stay. “Even if China speeds up approvals, we’re unlikely to return to the pre-April conditions,” noted a Capital Economics report released Friday.
Adding to the pressure is a set of sobering Chinese economic data released Monday. May exports grew only 4.8% year-on-year — down sharply from April’s 8.1% — while shipments to the United States plunged 34.5%, extending April’s 21% decline despite a May 12 tariff truce that lowered U.S. duties on Chinese goods from 145% to 30%.
The domestic picture also looks grim. China’s Consumer Price Index fell 0.1% in May compared to the previous year, while the Producer Price Index dropped 3.3% — the steepest year-on-year contraction in nearly two years. According to National Bureau of Statistics chief analyst Dong Lijuan, falling global energy prices, declining demand for raw materials, and a high base from 2024 explain the deflationary trend.
The London meeting is now seen as a key test of whether Washington and Beijing can rein in their economic rivalry through negotiation or if they have entered a new phase of entrenched systemic competition.
“This won’t be a breakthrough agreement,” said a senior European diplomat following the talks, “but if they can at least stabilize the rules of engagement, that would already count as progress.”
