Trump and Xi Break the Ice in Key Call, Agree to Restart Trade Talks

• President Trump and Chinese President Xi Jinping held a one-and-a-half-hour call focused on restarting stalled trade talks, with upcoming negotiations involving US representatives Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and US Trade Representative Jamieson Greer.
• The talks aim to address tensions over critical minerals, vital for industries like electric vehicles and medical devices, following a fragile 90-day tariff reduction truce that lowered tariffs by 115 percentage points but faced accusations of noncompliance.
• Both leaders invited each other for presidential-level visits, signaling potential for high-level dialogue, though challenges remain due to complex issues like China’s dominance in rare earth production and prior negotiation difficulties.

The recent phone call between President Donald Trump and Chinese President Xi Jinping, lasting one and a half hours, marks a significant step toward reviving trade negotiations between the United States and China. The conversation, initiated at Trump’s request, focused almost exclusively on trade, with no discussion of other geopolitical issues such as Russia/Ukraine or Iran, according to Trump’s statement on Truth Social. This development signals a potential thaw in the strained economic relationship between the world’s two largest economies, which have been grappling with complex trade disputes, particularly over critical minerals essential for industries ranging from electric vehicle batteries to medical devices.

The announcement of renewed talks follows a period of stagnation. In May, a 90-day truce negotiated in Geneva by Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer resulted in a mutual reduction of tariffs by 115 percentage points. However, accusations of noncompliance, particularly China’s alleged failure to ease restrictions on critical minerals, have threatened the agreement’s stability. Bessent recently described the negotiations as “stalled,” while Trump has publicly noted the challenges of dealing with Xi, describing negotiations as “extremely hard.” Despite these tensions, both leaders expressed openness to further engagement, extending and accepting invitations for a presidential-level visit, though the sequence of such visits remains unclear.

Trump confirmed that Bessent, Commerce Secretary Howard Lutnick, and Greer will represent the United States in upcoming trade discussions, with a meeting location yet to be determined. The focus on critical minerals underscores their strategic importance. These materials, including rare earth elements, are vital for advanced manufacturing, powering everything from semiconductors to jet engines. Trump emphasized their significance, stating, “There should no longer be any questions respecting the complexity of Rare Earth products.” China’s dominance in the global supply chain for these minerals – controlling roughly 60-70% of rare earth production, according to industry estimates – gives it significant leverage in trade negotiations. The US, seeking to reduce dependency, has been pushing for diversified supply chains and increased domestic production, though scaling such efforts remains costly and complex.

The resumption of talks could have far-reaching implications for global markets, particularly for industries reliant on critical minerals. Companies like Tesla (TSLA), General Electric (GE), and Medtronic (MDT), which depend on these materials for batteries, aerospace components, and medical devices, respectively, stand to benefit from any de-escalation in trade tensions. However, the path to a comprehensive trade deal remains fraught with challenges. Past negotiations have been derailed by mistrust and competing economic priorities, with the US emphasizing fair trade practices and China seeking to maintain its strategic advantages.

Chinese state media corroborated the call and its trade-focused agenda, aligning with Trump’s account. The mutual acknowledgment suggests a shared interest in stabilizing economic relations, though both sides will likely approach future talks with caution. For the US, securing reliable access to critical minerals is a national security priority as much as an economic one, given their role in defense and clean energy technologies. For China, maintaining its dominance in this sector is a key bargaining chip.

As the US team prepares for the next round of discussions, the stakes are high. A successful outcome could ease supply chain pressures and reduce costs for industries dependent on critical minerals, while failure risks further escalation of tariffs and trade barriers. The invitation for a presidential visit signals a willingness to maintain high-level dialogue, but the complexity of the issues – coupled with the history of stalled progress – suggests that any resolution will require sustained effort and compromise. For now, the restart of talks offers a glimmer of hope for de-escalation, with global markets and industries watching closely for what comes next.

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