US-China trade deal has been signed, says Trump

While details of the new US-China trade deal are unclear, it will likely ease restrictions on rare earth metals and high tech products

A handshake with one hand painted in the colours of the US flag and the other in the colours of the Chinese flag, symbolising improved US-China trade relations
(Image credit: Yaorusheng via Getty Images)

US-China trade could be back on track, as president Donald Trump announces that the two superpowers have agreed a “very big” trade deal.

While few details of the US-China trade deal are yet known, a White House official confirmed to press on 26 June that the countries had agreed “an additional understanding of a framework to implement the Geneva agreement” – referring to the step-down in the US-China trade war agreed in May.

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Despite the lack of details, the latest statements from the White House indicate “a cooling of tensions between the world’s two largest economies,” said Richard Hunter, head of markets at Interactive Investor.

The US-China trade war followed the sweeping tariffs that Trump announced on 2 April, dubbed ‘Liberation Day’.

China was hit by a 34% levy on all its exports to the US. That alone would have been a major impediment to US-China trade, but unlike many of the other countries hit by so-called “reciprocal” tariffs, Beijing took a firm stance and retaliated by raising tariffs on its own imports from the US.

That didn’t constitute a full US-China trade deal, but it appears that a more comprehensive, permanent agreement could be unveiled soon.

US-China trade update lifts markets

The US and China are the world’s two largest economies, by some distance. According to the World Bank, the two countries accounted for around 43% of global GDP between them in 2023, the most recent year for which data is available.

Swipe to scroll horizontally

Country

2023 GDP ($ trillion)

USA

27.72

China

17.79

Germany

4.53

Japan

4.20

India

3.57

UK

3.38

Source: World Bank

Nearly half the world’s goods are produced in either country. China’s share of global manufacturing output is 28.9% and the US’ 17.2%, according to United Nations Statistics Division data.

With the two countries playing such a pivotal role in the global economy, the danger was that the US-China trade war could lead to a global recession. It is no surprise that the announcement of the temporary pause lifted investors’ spirits.

The S&P 500 gained 0.8% on 26 June, up 20% from its April low and close to all-time highs. The Nasdaq 100, home to most of America’s tech and artificial intelligence (AI) stocks, closed 26 June 35% above the low it hit on 7 April.

“The ‘Magnificent Seven’ have come back into fashion,” said Hunter. “Another record high for Nvidia, itself enjoying a bounce of more than 60% since April, was accompanied by notable buying in the likes of Meta Platforms and Apple.”

When will the full US-China trade deal be announced?

At present it is unclear when we’ll get further details of the US-China trade deal.

The Geneva agreement still left US-China trade relations in a worse position than they were at the start of April, so in an ideal world the latest agreement will build on that.

According to a statement released by China’s Ministry of Commerce, the latest US-China trade agreement will see China permit the expert of rare earth elements – strategically important resources for a wide range of high-tech products – in exchange for a loosening of tech exports from the US to China.

Which other countries could follow the US-China trade agreement?

Trump also hinted that a trade agreement with India was on the way, and a US-UK trade deal is well underway, with an agreement to reduce tariffs on British car exports to the US agreed on 16 June.

The EU, though, was conspicuously absent from any mention of upcoming trade agreements, heightening concerns over the future of the bloc’s relationship with the US.

“The distinct omission of a timeframe for a deal with the EU may be one reason stock futures across the Channel are pointing downwards,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

It is also believed that the White House could extend the 90-day pause on the rest of the world’s ‘reciprocal’ tariffs that came into effect on 9 April, and is due to expire on 8 July.

Dan McEvoy
Senior Writer

Dan is a financial journalist who, prior to joining MoneyWeek, spent five years writing for OPTO, an investment magazine focused on growth and technology stocks, ETFs and thematic investing.

Before becoming a writer, Dan spent six years working in talent acquisition in the tech sector, including for credit scoring start-up ClearScore where he first developed an interest in personal finance.

Dan studied Social Anthropology and Management at Sidney Sussex College and the Judge Business School, Cambridge University. Outside finance, he also enjoys travel writing, and has edited two published travel books.