LONDON — Lancaster House, an ornate government mansion in the U.K. capital, is the location for the second round of tariff negotiations between the U.S. and China. Investors and world leaders are watching these talks closely to see if they can help thwart the prospect of a deepening trade war between the world's two biggest economies.
Talks continued into a second day Tuesday, with three of Trump's top aides attending. Commerce Secretary Howard Lutnick, Trade Secretary Scott Bessent and Trade Representative Jamieson Greer are in London, with Chinese vice premier and lead economic representative He Lifeng representing Beijing.
President Trump told reporters at the White House on Monday that he was getting "good reports" from the talks. "We're doing well with China. China's not easy," Trump said.
The two sides last met in Geneva in May, where they agreed to a 90-day pause on the more than 100% base tariffs that each side had levied on the other as the trade war escalated. Some U.S. tariffs imposed during a previous trade war during Trump's first term have remained in place on Chinese goods as well.
Overall, U.S. tariffs on goods from China still remain higher than those imposed on other countries. The U.S. cut its base tariffs on goods from China to 30%, while China cut tariffs to 10%.
Chinese exports of rare earth minerals, which are vital to carmakers and other industries, and China's access to high-end technology from the U.S., including computer chips, are high on the agenda this time around.
The American negotiation team has also continued to push China to purchase more American goods and reduce a U.S. trade deficit with China, a key demand in a so-called Phase One trade deal struck during Trump's first term and which China never fully implemented.
Relations between the two countries have deteriorated since their tentative truce in Geneva, with each accusing the other of violating the agreement struck there.
China retaliated against U.S. tariffs by halting more of its exports of rare earths, the refining of which it has a near monopoly on. Beijing has been quietly restricting the export of rare earths to the U.S. and European Union since 2024 but in recent weeks has cut off even more minerals. Chinese customs data show rare earths exports by value have dropped by more than 20% this year compared to the same period last year.
President Trump said last week that China's Xi Jinping had agreed to restart the flow of these rare earths, and analysts say there may be some progress on this sticking point during the talks this week.
But while China has said it would be willing to set up an expedited "green channel" for companies needing rare earths, it has also signaled it will not completely ease its powerful grip on the world's supply of refined rare earth products, saying its export controls are "driven by its domestic industrial sustainable development needs," according to a commentary published this week by the country's state news agency.
There have also been tensions after the U.S. announced stringent new export controls on high-end semiconductor chip technology, including chip design software, on China — and said it also plans to revoke some visas held by Chinese students.
Yu Jie, senior research fellow on China at London's Chatham House international affairs think-tank, warns that we "should not hold our breath for any major progress" following the talks, with both sides unlikely to offer any further tariff reductions. "We're now into deep water of trade negotiations between Beijing and Washington. China is aware of the importance of holding this card of the rare earth export controls. On the other hand, the U.S. really wants to slow down China's technology progress."
Yu says the two sides will have to talk through some of these thornier sticking points over the next few days. Lutnick said Tuesday he expects the talks to go on "all day." He told reporters the talks were "going well" and "we're spending lots of time together." The Chinese delegation is in London all week and talks could go on beyond Tuesday.
In a separate meeting in London, China's commerce minister Wang Wentao spoke with Britain's business secretary, Jonathan Reynolds. A statement from China's commerce ministry said Wang called for both countries to uphold the multilateral trading system, and he wanted to see greater cooperation between China and Britain on finance and sustainability.
The U.K. government says it's providing the venue and logistics for the U.S.-China talks but is not involved in them. "We are a nation that champions free trade and have always been clear that a trade war is in nobody's interests, so we welcome these talks," it said in a statement.
The U.K. is in the process of trying to finalize its own trade deal with the U.S., which it struck last month.
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