US and China Sign Major Trade Agreement Amid Ongoing Tensions

Executive Summary

On June 27, 2025, the United States and China officially signed a significant trade agreement after months of escalating tensions and negotiations. While the deal maintains steep tariffs—55% on Chinese goods entering the US and 10% on US goods entering China—both sides have agreed to new frameworks regarding export controls, especially for rare earth elements. The specifics of the agreement remain largely undisclosed, but rare earth export controls and ethane trade were central points. This development marks a crucial turn in US-China relations and has implications for global economic growth, technology supply chains, and international trade policy.

Latest Development

On June 27, 2025, China’s Ministry of Commerce confirmed that a trade agreement had been signed between China and the United States. The announcement came after US President Donald Trump told reporters at the White House on June 26 that the two nations had finalized the deal. The agreement preserves high tariffs—55% on Chinese goods and 10% on US goods—but includes a framework for China to accelerate the approval of export licenses for rare earth elements, which are crucial for high-tech manufacturing. In exchange, the US has agreed to lift a series of restrictive measures previously imposed on China. The deal follows intensive negotiations, with recent rounds taking place in Geneva and London earlier this month, and addresses major sticking points such as rare earth export controls and ethane trade.

Recent Developments

• June 27, 2025: China and the US announce the signing of a trade agreement, with both sides agreeing to maintain existing tariffs but streamline export controls on rare earths. China’s Ministry of Commerce issues a statement confirming the deal and its framework.
  [1][2][4]
• June 26, 2025: President Trump tells media that the US and China have "just signed" the trade deal, providing few details.[1][3]
• June 10, 2025: The World Bank lowers its 2025 global growth forecast to 2.3%, citing ongoing US-China trade tensions and tariff uncertainty as primary factors.
  [3]
• Early June 2025: Talks in London yield a framework for the current deal, building on a previous consensus reached in Geneva in May, where both sides agreed to postpone further tariff hikes.[1][2][4]
• April 2025: China imposes new permitting requirements on seven rare earth elements, threatening to disrupt US tech manufacturing and prompting accelerated negotiations.
  [1]

Key Impact & Analysis

The agreement signals a partial thaw in US-China trade relations but leaves major structural issues unresolved. The maintenance of steep tariffs—55% on Chinese goods and 10% on US goods—will continue to raise costs for businesses and consumers in both countries. The resolution of rare earth export controls is particularly significant: China dominates global production of these critical materials, which are essential for industries ranging from electric vehicles to defense technology. By agreeing to expedite export license approvals, China alleviates immediate concerns of supply disruptions for US manufacturers, although the underlying strategic rivalry remains.

For the US, the agreement represents a tactical win for President Trump, who can claim to have secured concessions without fully lifting tariffs. However, industry groups warn that high tariffs will continue to weigh on supply chains and global competitiveness. For China, the deal averts the risk of a deepening trade war while retaining leverage through its control of rare earth exports. The World Bank’s recent downgrade of global growth forecasts underscores the broader economic stakes: extended trade friction between the world’s two largest economies has already dampened global trade flows and business investment.
[3][4]

The agreement also touches on Section 232 measures and US restrictions related to national security, with Washington agreeing to lift some of these as part of the deal. Ethane trade, another sticking point, remains less detailed in public statements but is understood to have been part of the negotiations.

Looking Forward

While the deal halts further escalation and provides short-term stability, it does not resolve deeper issues such as technology transfer, intellectual property, or broader tariff policy. Both sides are expected to monitor compliance closely, particularly regarding rare earth exports and the removal of US restrictions. Key dates to watch include future meetings of the US-China Joint Trade Commission and scheduled reviews of the agreement's implementation in late 2025.

Markets and policymakers will be watching for signs of renewed tensions or cooperation, especially as both countries head into politically sensitive periods. Should either side fail to uphold the terms, or should new disputes arise, the risk of another cycle of tariff hikes and export controls remains. The global growth outlook will likely remain subdued until a more comprehensive and lasting settlement is reached.

Sources

1. https://www.euronews.com/business/2025/06/27/beijing-confirms-that-it-has-signed-a-trade-agreement-with-the-us
2. https://www.scmp.com/economy/china-economy/article/3316076/china-us-finalise-trade-deal-beijing-confirms-breakthrough-talks
3. https://www.weforum.org/stories/2025/06/us-china-deal-and-other-international-trade-stories-to-know-this-month/
4. https://economictimes.com/news/international/global-trends/china-confirms-trade-deal-reached-with-united-states/articleshow/122108057.cms