The United States and China appear to be inching closer to salvaging their fragile trade truce, with top officials from both sides agreeing in London this week to a tentative framework that could reboot the trade détente originally announced in Geneva last May.
Though details remain sparse, the framework—negotiated by U.S. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, along with Chinese Vice Premier He Lifeng and Vice Minister of Commerce Li Chenggang—aims to ease mutual restrictions that have strained global supply chains and financial markets.
According to Moody’s Analytics, the framework focuses on two critical pressure points: U.S. restrictions on high-end technology exports and China’s curbs on rare earth mineral shipments. If formally signed by Presidents Donald Trump and Xi Jinping, the deal would see the U.S. rolling back limitations on computer chips and advanced manufacturing equipment, while China would begin approving export licenses for vital materials like rare earth magnets—essential components in everything from electric vehicles and semiconductors to military hardware.
Lutnick described the potential rollback of U.S. sanctions as happening “in a balanced way,” contingent on Beijing’s follow-through on export licenses. China’s state news agency Xinhua quoted Vice Minister Li as expressing hope that the London talks would “strengthen trust and promote bilateral trade.”
Moody’s Analytics analysts, however, emphasized that this tentative agreement is “a step toward de-escalation, not a breakthrough.” The muted reaction from Chinese markets backs this view: the CSI 300 Index rose just 0.8% in Wednesday’s midday trading, signaling investor wariness over the lack of specific commitments or timelines. “Tentative agreements hold significance, but concrete outcomes ultimately influence market sentiment,” the firm noted.
Japan’s revised growth numbers show modest upside
Meanwhile, Japan’s economy delivered a small surprise. Revised GDP figures for the first quarter showed flat growth, an improvement from the initial estimate of a 0.2% contraction. The revision was driven by stronger-than-expected private consumption, although declines in business and government investment tempered the overall picture.
Moody’s pointed out that Japan’s economic outlook remains clouded by global trade tensions, weak household spending, and persistent inflation. “Tariff threats are weighing on exports and industrial output,” the report stated. “Real wage gains remain elusive, further straining household consumption.”
With an upper house election looming in July, political pressure is mounting. The opposition has called for consumption tax cuts to alleviate the cost-of-living crisis, while Prime Minister Ishiba Shigeru has so far resisted any major fiscal intervention—an increasingly tenuous stance in the face of economic headwinds.
What to watch this week
Looking ahead, Moody’s Analytics outlined several key developments to monitor during the week of June 14–20:
- Bank of Japan: The central bank is expected to hold rates steady amid weak economic data. Attention will be on its bond-buying strategy, especially after recent volatility in long-term yields.
- China’s Industrial Output: May’s industrial production is expected to rise 6.3% year over year, slightly up from April’s 6.1%, buoyed by temporary trade relief.
- New Zealand’s GDP: Forecasts point to a modest 0.5% quarter-on-quarter growth, signaling a gradual recovery from the 2024 downturn.
- China’s Lending Rates: The People’s Bank of China is likely to keep the one- and five-year loan prime rates unchanged as it observes progress on the U.S.-China trade front.
While the London agreement between Washington and Beijing may not yet be a game-changer, it signals a mutual interest in restoring some predictability to global trade—a crucial development at a time when markets are hungry for stability. For now, all eyes remain on the upcoming presidential sign-offs and whether this tentative truce can transform into lasting economic détente.