US-China Trade Talks Go On For Second Day: Here’s What’s At Stake

High-stakes trade negotiations between the U.S. and China continued into a second day Tuesday, as both sides sought to defuse a trade war that threatens both economies.

Talks in London led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng continued into the night Tuesday, Bloomberg reported, citing Treasury Department officials. The two sides were hammering out technical details of an agreement, according to reports.

“We’re working on all sorts of trade issues, and I think talks are going really, really well,”  and could continue Wednesday, Commerce Secretary Howard Lutnick told reporters, according to The Wall Street Journal.

The ongoing talks between the two economic superpowers reassured investors, boosting stocks Tuesday on the prospect of lowering the tit-for-tat trade barriers the two countries have put up in recent months. A key aim for the U.S. is restoring access to Chinese rare earth minerals used to make batteries and advanced electronics. In return, the U.S. reportedly could lift restrictions on exporting jet engine parts, computer chip design software, and other high-tech items to China.

The two countries have also imposed high import taxes on one another, although some of those are paused while negotiations continue. A breakdown in talks could threaten industrial supply chains in both nations, and cause price hikes and shortages for U.S. consumers, according to trade experts.

Ironically, the favorable reaction of the stock market to the talks could carry its own risks, according to David Folkerts-Landau, Group Chief Economist at Deutsche Bank.

“One key concern is that the Trump administration, buoyed by the market rebound, may resume aggressive tariff rhetoric—potentially triggering renewed retaliation from China and Europe, as seen earlier this year,” he wrote in a commentary.

Meanwhile, the administration of President Donald Trump is pursuing trade deals with multiple other countries. Less than a month remains until Trump’s 90-day pause on his “Liberation Day” tariffs expires, which would raise tariffs to double-digit levels on dozens of U.S. trading partners. The outlook for trade talks has become cloudier in recent weeks, as U.S. courts first ruled that many of the tariffs were illegal, only to have another court allow them to proceed while lawsuits play out.

Economists have warned the U.S. economy could fall into a recession if tariffs are restored to the high levels Trump announced April 2.

Where Both Countries Can Hurt One Another

Both countries have found pain points to exploit in the trade war, according to  Anthony Rapa, co-chair of the international trade practice at law firm Blank Rome.

On the Chinese side, exports of rare earth minerals have hurt U.S. industries, especially automakers. The rare earth restrictions have also hurt U.S. allies, who may be adding diplomatic pressure on Trump to get a deal done, Rapa told Investopedia in an interview.

“Rare earths have become so essential to the supply chain, and it’s been something that I think companies and countries around the world have been concerned about for a long time, which is that China has, for the time being, such a strong position in that part of the supply chain that if they ever were to flex a choke point there, that it could have a really negative impact on the world economy,” he said.

For the U.S., Trump’s restrictions targeting Chinese technology companies threaten to hinder China in the international competition to develop artificial intelligence.

“There’s a real race regarding AI supremacy, both in terms of the power of the technology and also whose technology is going to be adopted around the world,” Rapa said. “And this is stuff that China really cares about. They’ve got a lot of other concerns too, but this seems to be a sticking point for them.”

Update, June 10, 2025: Updated after publication to add quotes from Howard Lutnick and Anthony Rapa.