US-China Trade Deal Reached, But Markets Remain Skeptical

Donald Trump claims a US-China deal is done, but markets remain uncertain. The agreement includes China supplying rare earths and magnets in exchange for US permission for Chinese students to attend US universities. However, the framework's details are unclear, and Beijing may still hold the upper hand. US consumer inflation eased, sending the S&P 500 higher, but the benchmark later turned red due to Treasury Secretary Scott Bessent's comments on trade and the impact of Trump's tax bill on US debt.

US President Donald Trump has announced a new trade deal with China, potentially resolving longstanding issues over rare earth minerals and magnets. The agreement, reached after two days of negotiations in London, involves China supplying the US with these critical materials in exchange for US permission for Chinese students to attend American universities. However, the specifics of the deal remain unclear, and markets remain uncertain.

The agreement is built on a previous deal struck in Geneva last month, which had stalled due to China's restrictions on the export of rare earth minerals. These minerals are crucial for various defense technologies, including F-35 fighter jets, submarines, and smart bombs [1]. The new deal aims to address these concerns, with China agreeing to supply "full magnets and any necessary rare earths up front" [1].

In return, the US will allow Chinese students to study in American colleges, a move that could help bridge the gap between the two countries. However, there are concerns about forced labor in Xinjiang, where many of these minerals are produced. A recent report suggested that some Chinese companies may be using forced labor, which could impact the legitimacy of the deal [3].

The deal also includes a reduction in tariffs, with the US imposing 55% tariffs and China 10% [3]. This is a significant change from the previous tariff war, which had caused chaos in global trade and led to billions in losses for companies [3].

However, the framework's details are still unclear, and Beijing may still hold the upper hand. The deal needs final approval from both Trump and Chinese President Xi Jinping before it can be implemented. Additionally, the deal does not address other ongoing trade disputes between the two countries.

The stock market reacted to the news, with the S&P 500 initially rising due to easing consumer inflation. However, the benchmark later turned red due to comments from Treasury Secretary Scott Bessent on trade and the impact of Trump's tax bill on US debt [2].

In conclusion, while the new trade deal with China addresses some critical issues, many details remain uncertain, and the impact on the global economy and US-China relations remains to be seen.

References:
[1] https://www.theguardian.com/business/2025/jun/11/trump-china-trade-deal
[2] https://www.theguardian.com/world/2025/jun/11/us-china-trade-talks-framework-deal-amid-dispute-over-rare-earths
[3] https://economictimes.indiatimes.com/news/international/us/donald-trump-announces-u-s-china-trade-deal-involving-rare-earths-key-points-you-need-to-know/articleshow/121780727.cms