On Wednesday, Donald Trump announced his endorsement of a US-China trade deal negotiated in London. The arrangement would reportedly allow the United States access to rare earth minerals and magnets necessary for automotive production while still raising tariffs on Beijing to 55 percent.
While those tariffs admittedly seem quite high, the White House asserted that they’re a massive decline from the figures both nations were throwing around early in negotiations that surpassed 100 percent. The Trump administration said that the 55-percent figure was landed on by adding the baseline 10-percent tariff it wants to impose globally while incorporating the 25-percent tariff China was already subject to and a 20-percent levy imposed for fentanyl trafficking. Fentanyl is estimated to kill tens of thousands of Americans every single year and the White House has attempted to use tariffs as a bargaining chip to discourage China from allowing its exportation into North America.
Negotiations were led by U.S. Treasury Secretary Scott Bessent, accompanied by Commerce Secretary Howard Lutnick and trade representative Jamieson Greer. The full details of the agreement haven’t been released, with the relevant parties calling what’s being shared a “framework.” But it really just seems to be both sides walking back earlier plans to aggressively penalize the other earlier this year.
Trump verified his approval via social media on Wednesday, noting that final approval would hinge on him and China’s President Xi formally agreeing to the plan. “We are getting a total of 55 [percent] tariffs, China is getting 10 [percent],” he said. “Relationship is excellent!”
He also noted that the United States would be freeing up restrictions on Chinese students attending American universities. The United States trying to prohibit China’s access to allegedly sensitive technologies should similarly be walked back. Meanwhile, the exceptionally high retaliatory tariffs appear to have been absolved following concerns from manufacturers that China hoarding materials (along with staggeringly high global tariffs) would not be good for business.
We previously reported on the automotive sector’s response to China imposing export restrictions on magnets and certain minerals necessary for production. Automakers had suggested that production stalls would become commonplace without them — likely encouraging leadership to come to the table with trade solutions.
Frankly, the trade war didn’t seem to be working particularly well for either country. Chinese exports fell by over 35 percent last month. At the same time, U.S. inflation has continued to climb to a point where consumers are starting to snub certain purchases. While the automotive market saw some renewed attention last month, most of that was arguably down to panic buying over fears that tariffs would soon drive new vehicle prices even higher. However, when one examines the record levels of automotive debt presently being carried around by Americans and high levels of owners defaulting on payments, it’s clear that current MSRPs were already untenable.
The U.S. consumer price index (CPI) rose to an annual rate of 2.4 percent in May, up from 2.3 percent in April. While the Federal Reserve suggests 2 percent as acceptable, wages have not kept pace in years and vehicle prices have come up much more than other goods. Conservative estimates suggest that the average transaction price of a new vehicle has increased by over 30 percent since 2020.
[Image: noamgalai/Shutterstock]
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