US and China inch toward a trade truce (which already existed): EU remains on the sidelines

Brussels – The United States and China have reportedly found a deal to suspend the tariff escalation, which was driving the world’s two largest economies into an open trade war. At least, this is the reading of Donald Trump. In reality, Washington and Beijing have only struggled to return to where they were a month ago, while a structural and lasting solution does not appear close. The only thing sure, for now, is that Europe continues to stand at the window, waiting for the US president to change his mind on tariffs.

White smoke from London

“Our agreement with China is done,” Donald Trump wrote yesterday (June 11) on his Truth Social, specifying that all that is now missing is the “final approval” from him and Chinese President Xi Jinping. Speaking to the press, the New York tycoon later described as “great” the agreement reached. “We have everything we need, and we’re going to do very well with it. And hopefully, they are too,” he said.

Not many details have been released regarding the preliminary understanding reached between the negotiating teams, which emerged yesterday from a two-day marathon in London. So far, all that is known is that Beijing has pledged to resume exports to the States of magnets and rare earths without restriction, while Washington has backed down on threats to suspend visas for students from the People’s Republic.

On the tariffs side, the US administration maintained an overall tariff pressure of 55 percent (compared to 145 percent previously in force) on Chinese products, comprising 10 percent “reciprocal” tariffs, an additional 20 percent imposed on China (along with Canada and Mexico) as punishment for efforts deemed insufficient in countering the spread of fentanyl and, finally, the 25 percent introduced by Trump during his first term and never removed by his successor Joe Biden. Conversely, China will lower tariffs on US goods from 125 to 10 percent.

The dark sides of the agreement

According to many observers, however, the White House occupant is overly enthusiastic about the deal. On the one hand, the discussions in the British capital have not led to real progress in negotiations between Washington and Beijing to avoid an all-out confrontation. It is impossible to rule out this possibility definitively until the two economic giants conclude the infamous “comprehensive trade agreement” (Trump would like to sign it by the end of the summer).

In fact, the two countries now find themselves in the same position as last month, when they agreed in Geneva on a compromise that, in fact, is as good as yesterday’s. In the intervening weeks, the two sides reciprocally accused each other of violating those terms, triggering a rapid tariff escalation that threatened to damage both severely.

The People’s Republic failed to remove restrictions on the export of rare earths and magnets, and the US reacted by restricting the sale of semiconductors, software, and chemicals and threatening to suspend visas for Chinese students and researchers.

As Beijing’s Deputy Trade Minister Li Chenggang emphasized, what was agreed in the London talks is nothing more than a “framework agreement” valid “in principle,” which will have to be used to translate into concrete action “the consensus reached by the two heads of state during the June 5 telephone call and the consensus reached during the Geneva meeting.”

According to US Commerce Secretary Howard Lutnick, the two days in London – which some press reports have described as tense, reflecting the climate of distrust between the respective negotiating teams – have “brought order” to the parties’ priorities: “We are on the right track,” he says, but it is a road that remains uphill. Even for Treasury Secretary Scott Bessent, reaching a comprehensive agreement will take “much longer.”

On the other hand, several analysts note that Trump would have overreached from a strategic and geopolitical point of view. It would have been a gamble to raise his voice so loudly with the People’s Republic both because, on balance, China has more alternatives than the US if trade between the two superpowers were to decline further (or even stop) and because the communist leadership has a leeway that no democratic government can have.

Banging your fists on the table and blackmailing, triggering an uncontrollable spiral of trade retaliation, may not be the most far-sighted way to deal with Beijing, especially for those who – like Washington – are in a situation of substantial dependence on critical raw materials in which China holds a virtual planetary monopoly.

And without which US industries (heavy industry, automotive, technology, and, above all, the military) would crash, much to the detriment of the delusions of omnipotence in MAGA style. In short, Trump may have engaged in arm wrestling that, quite simply, the United States cannot win today.

The EU remains idle

At any rate, the US president suggested today (June 12) that he will hear from Washington’s trading partners in the coming weeks to negotiate new unilateral tariffs before the temporary suspensions granted to some countries and the EU expire. The target date is July 9, but the window could stretch even further: it is “highly likely” that “we will postpone the date to continue negotiations in good faith,” Bessent predicted.

For the time being, the EU executive is tight-lipped in Brussels. What has come out of London is “good news for the world,” says spokeswoman Paula Pinho. However, “we must wait to find out more, to see if and how (the US-China agreement, Ed.​) will affect the EU.” Negotiations between the Commission – represented by Trade Commissioner Maroš Šefčovič – and the White House continue behind closed doors. At the same time, the 50 percent tariffs on Made in Europe steel and aluminium remain in force.  

At this point, only a meeting between Trump and Ursula von der Leyen at the highest level can untangle a tangled situation. All eyes are on the G7 in Kananaskis, Canada, from June 15 to 17. However, no confirmation from the Berlaymont of a bilateral meeting between the two leaders has leaked.

A few days later, on June 24-25, they will meet again in The Hague for the NATO summit, during which the members of the Alliance will agree to the new targets for military spending at 5 percent of GDP. After all, this is a request made by Trump himself, and who knows, if Europeans will agree to put their hands in their wallets, the tycoon might not also relent on the tariffs that are strangling the Old Continent’s economy.