U.S., China reach "framework" to activate last month's trade deal

After two days of talks in London, the U.S. and China agreed late Tuesday on a "framework" to implement a trade deal struck last month, pending approval from both countries' leaders, Commerce Secretary Howard Lutnick said.Why it matters: Progress on trade peace with China, particularly if it resolves the issue of crucial Chinese rare earth minerals exports, would be a boon to an economy and markets that have struggled for months with the impact of President Trump's tariff program.The backstory: Lutnick told Axios while flying back from London early Wednesday that the deal is "great for America." Lutnick told us that a big key was President Trump's decision to take a positive approach during his lengthy call last week with Chinese President Xi Jinping.Chinese officials quoted from the call several times during the marathon negotiations with Lutnick, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer.The deal was announced near midnight at Lancaster House, a 200-year-old mansion near Buckingham Palace.Lutnick, who for four decades was a top dealmaker on Wall Street, credited "stamina and staying power": "When you see a deal is possible, you stay at it."Catch up quick: After a series of tit-for-tat retaliations in April, the world's two largest economies effectively had a trade embargo in place, with 145% U.S. tariffs crushing imports from China. The sides announced a trade deal that included a 90-day pause on most of those tariffs on May 12 after a weekend of high-level talks in Geneva.Only days later, the U.S. issued global restrictions on the use of certain Chinese chips from Huawei Ascend, saying they were developed in violation of U.S. export controls. The Chinese reacted furiously. Soon there were reports the government was restricting exports of the rare earth materials needed for hundreds of the world's most important high-tech products. The U.S. subsequently retaliated with a move to restrict and withdraw visas for Chinese students. Where it stands: Trump and Xi spoke for 90 minutes last Thursday about trade issues, and agreed to high-level talks immediately.That led to this week's meeting in London."We have reached a framework to implement the Geneva consensus," Lutnick told reporters in London Tuesday night after marathon trade talks, Bloomberg reported. The Wall Street Journal reported that Tuesday's deal would essentially get the May 12 deal back on track, including the lowered tariffs and the loosened Chinese restrictions on rare earths. Between the lines: The trade war is squeezing both economies.Bloomberg reported Monday that Chinese May exports missed expectations, with a 34% drop in shipments to the U.S. despite the trade truce — the biggest decline since the early days of the pandemic. U.S. hard economic data has thus far been resilient, though there are growing signs of weakness in the labor market and rising prices. What to watch: The deal is now in the hands of the two leaders, with few specifics yet about what it entails or how it would be implemented. Editor's note: This version is updated with an Axios interview with Commerce Secretary Howard Lutnick.

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