US-China Trade Talks Yield Framework But Trust Deficit Persists

Economic

China–U.S. Trade War

Summary:

The US and China have agreed to a preliminary plan aimed at easing trade tensions and restoring rare earth shipments, but unresolved mistrust...

Preliminary Breakthrough: Framework Without Finality

Following two intense days of negotiations in London, US and Chinese officials announced a preliminary framework to implement the earlier Geneva consensus on reducing trade tensions. Central to this new plan is resolving the standoff over rare earth minerals and magnets—critical inputs in advanced manufacturing. US Commerce Secretary Howard Lutnick emphasized that if approved by both presidents, the pact would lead to mutual easing of export restrictions and a partial rollback of recently imposed controls on both sides.

While this represents an important de-escalation in rhetoric and policy, the agreement lacks clarity in scope, and crucial implementation details remain undisclosed. The market reaction reflected this cautious optimism, with equity indexes stable but muted moves in forex markets.

Rare Earths: Strategic Leverage Amidst Export Controls

Rare earth elements have emerged as a central axis of power in this economic standoff. China currently dominates global production and processing of these minerals, essential to EVs, mobile devices, and defense technologies. The United States’ recent restrictions on chip design tools, engine parts, and high-grade chemicals were retaliation for delays in Chinese rare earth exports, which Washington claims were strategically motivated. China, in turn, argues that procedural bottlenecks were misinterpreted as coercive action.

By conditioning export relaxation on China's licensing approval, the US effectively used its tech export controls as leverage to unblock rare earth flows. This illustrates a growing trend where geopolitical friction reshapes global supply chains through weaponized interdependence, with microeconomic disruptions engineered through macro-political signaling.

Persistent Trade Uncertainty and Erosion of Trust

Despite this temporary reprieve, the broader trade environment remains uncertain. The current 90-day pause on tit-for-tat tariffs is only one-third completed, and no follow-up meetings are scheduled. This reflects the fragile nature of the talks, which remain heavily personality-driven, hinging on whether Trump and Xi approve the framework.

Trade Representative Jamieson Greer acknowledged that fentanyl—previously cited as a reason for imposing tariffs—is also on the table, raising questions about how security issues are being conflated with trade, further blurring the boundaries of economic diplomacy.

Importantly, China’s exports to the US plunged by 34% in May—underscoring that beyond tariffs, sentiment and trust are eroding trade volumes. Professor Josef Mahoney notes that lost sales are secondary to the breakdown in predictability and trust, which he likens to a performance overshadowed by political spectacle.

Stability Without Euphoria

While the MSCI all-country equity index closed at a record high, markets largely shrugged off the news, viewing it more as a signal of reduced downside risk than a genuine breakthrough. The offshore yuan edged higher while the dollar remained subdued—suggesting guarded optimism rather than robust investor confidence.

Charu Chanana of Saxo Markets remarked that the transition from confrontation to coordination is positive, but the lack of future scheduled meetings and unresolved structural tensions mean the deal’s success is far from assured.

Symbolic Progress Masks Structural Friction

The London framework represents an important, if symbolic, shift in tone between the US and China. Yet without transparent benchmarks, enforcement mechanisms, and follow-up dialogue, the risk remains that this progress is short-lived. The agreement may facilitate smoother rare earth flows and ease some tech export restrictions, but deeper issues—such as technological sovereignty, supply chain resilience, and political mistrust—continue to drive the strategic rivalry.

For now, the world’s two largest economies have paused escalation. Whether that leads to a sustainable truce or merely delays the next flashpoint will depend not on bureaucrats in London, but on the next moves from Beijing and Washington.

Source: Bloomberg

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Commodity

Early Market Optimism Gives Way to Supply-Demand Concerns

Oil markets started Wednesday on a softer note, reflecting investor uncertainty over the real-world impact of the US-China trade framework deal. Brent crude futures fell by 0.36% to $66.63 per barrel, and West Texas Intermediate (WTI) declined by 0.32% to $64.77, as early enthusiasm faded amid underlying bearish fundamentals.

Although US Commerce Secretary Howard Lutnick confirmed that a framework agreement had been reached to revive the Geneva trade truce and resolve disputes over Chinese export restrictions on rare earths and magnets, the deal still awaits final approval from President Donald Trump. As such, traders exercised caution in fully pricing in its potential economic boost.

Short-Term Relief, But Long-Term Demand Still in Question

While the agreement marginally reduces geopolitical risk and helps steady macroeconomic sentiment, analysts say the implications for oil demand remain limited in the near term. Tony Sycamore, a strategist at IG, noted that the deal reduces downside risk for both the Chinese and US economies, which in theory should be supportive for oil prices. However, current data from China—still the world’s largest crude importer—reflects persistent demand weakness.

Chinese customs data showed that crude imports in May fell 3% month-over-month to 46.6 million tonnes, while oil product imports dropped sharply by 12.9%. This decline underlines broader economic sluggishness within China, raising questions about the country’s near-term contribution to global energy demand recovery.

Supply Pressure from OPEC+ Adds Bearish Tilt

Adding further weight to the bearish sentiment, OPEC+ continues to unwind its earlier production cuts. The group plans to boost output by 411,000 barrels per day in July, the fourth consecutive monthly increase. With global supply rising and demand indicators softening, the oil market faces a tightening margin between surplus and balance.

This supply expansion is occurring just as Chinese imports falter, creating a potential mismatch that could pressure prices in the short term unless demand growth accelerates in other regions or geopolitical disruptions arise.

Inventory Data in Focus as Traders Seek Clarity

Later on Wednesday, attention will shift to the US Energy Information Administration’s (EIA) weekly oil inventory report. Reuters-polled analysts expect a 2 million barrel draw in US crude stocks for the week ending June 6, which, if confirmed, would represent a bullish signal. However, preliminary data from the American Petroleum Institute showed a smaller-than-expected draw of just 370,000 barrels, raising doubts about the EIA's estimate.

Gasoline and distillate inventories are expected to rise, potentially indicating soft refining margins or stagnant consumer demand, further complicating the outlook for oil prices.

Despite diplomatic progress between the US and China, global oil markets remain under pressure from weak Chinese demand and a steady increase in OPEC+ supply. The tentative trade framework offers some relief to macroeconomic uncertainty, but without a corresponding recovery in real demand or a sustained drawdown in inventories, oil prices are likely to remain range-bound. Near-term volatility will hinge on US stockpile data and the trajectory of China's economic recovery.

Source: Reuters

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Economic

Revival of Managed Trade Framework Signals Shift in Tone

The United States and Mexico are reportedly finalizing a deal that would remove steep US tariffs on Mexican steel imports—currently set at 50%—in favor of a quota-based system, according to sources familiar with the discussions. The arrangement would allow duty-free access for Mexican steel up to a certain volume, reviving a trade-limiting mechanism previously used during Trump’s first term to “prevent surges” in imports without imposing blanket tariffs.

While the final agreement remains under negotiation, the prospective deal reflects a calculated recalibration of the Trump administration’s steel strategy. Although President Trump has not been directly involved in the talks, his approval will ultimately be required. Commerce Secretary Howard Lutnick is leading the negotiations, which have intensified amid broader bilateral friction and ahead of a key G7 summit.

Steel Quotas Based on Historical Trade Volumes

According to those briefed on the discussions, the proposed cap on Mexican steel imports would be based on prior trade levels, with a higher ceiling than the flexible thresholds agreed to under the 2019 deal between the two countries. At the time, those limits were anchored to average volumes from 2015–2017. In 2024, the US imported 3.2 million metric tons of steel from Mexico, representing 12% of total imports, according to Commerce Department figures.

This model—allowing duty-free imports below a cap while imposing duties on excess volumes—represents a middle ground between blanket protectionism and free trade, offering predictability to manufacturers while preserving safeguards for domestic producers.

Industry Reaction Highlights Trade-Offs

News of the pending deal led to mixed reactions in financial markets. While the Mexican peso stabilized slightly, US steel stocks fell sharply, with Cleveland-Cliffs and Nucor losing over 7% and 4% respectively in late trading. The declines reflect investor concern that increased access to Mexican steel could soften domestic prices, eroding margins for American producers, even as downstream industries welcome cost relief.

The deal’s political messaging is equally complex. Trump’s recent announcement to double steel tariffs coincided with his controversial approval of Nippon Steel’s purchase of US Steel Corp.—a move aimed at projecting a pro-industry stance. Yet these new talks show the administration is also sensitive to mounting pressure from steel end-users seeking tariff relief amid inflationary concerns.

Diplomatic Context: Trade Policy as a Bargaining Chip

The negotiations also align with broader discussions between Washington and Mexico City on contentious issues like immigration and cross-border drug trafficking. Mexican Economy Minister Marcelo Ebrard has publicly argued that tariffs on Mexico are unjustified, noting that the US exports more steel to Mexico than vice versa. His recent meetings with Lutnick and optimistic public statements suggest both sides are eager to de-escalate ahead of a potential Trump-Sheinbaum encounter at the upcoming G7 summit in Canada.

Nonetheless, geopolitical friction remains. US Homeland Security Secretary Kristi Noem accused Mexican President Claudia Sheinbaum of supporting anti-deportation protests in Los Angeles—a claim Sheinbaum has denied. Such narratives underscore how trade negotiations are unfolding within a volatile political climate.

Tactical De-escalation Amid Broader Strategic Contest

The anticipated US-Mexico steel deal underscores a growing preference within the Trump administration for managed trade over unilateral tariff enforcement—at least with certain strategic neighbors. By offering tariff relief in exchange for import caps, Washington signals a willingness to recalibrate aggressive policies when faced with political, economic, or diplomatic friction.

Yet the outcome may still polarize stakeholders. Domestic steelmakers are wary of increased foreign competition, while manufacturers dependent on affordable materials see it as a pragmatic step. The final shape of the deal—and its implications for broader trade relations—will likely hinge on both political calculation and the outcome of high-level diplomacy in the weeks ahead.

Source: Bloomberg

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Economic

China–U.S. Trade War

Framework Agreement Signals Progress, But Final Approval Still Pending

After two days of tense negotiations in London, US and Chinese officials announced on Tuesday that they had reached a framework and implementation plan aimed at de-escalating trade tensions. The breakthrough, announced by US Commerce Secretary Howard Lutnick, centers on resolving disputes over rare earth exports and US restrictions on high-tech components.

“We have reached a framework to implement the Geneva consensus,” Lutnick said, referring to the temporary truce brokered last month. The plan must now be reviewed and approved by US President Donald Trump and Chinese President Xi Jinping, who last week held a phone call that helped revive diplomatic momentum.

This development offers cautious optimism after weeks of mutual accusations over breaches of the Geneva truce. Still, the lack of detailed enforcement mechanisms and continued uncertainty over US tariff policy make it unclear whether this new deal will lead to durable de-escalation or simply postpone further confrontation.

Tariff Uncertainty Deepens as Court Ruling Favors White House

Underscoring the volatile nature of US trade policy, a federal appeals court ruled Tuesday that Trump's controversial tariffs—initially blocked by the US Court of International Trade—can remain in effect pending further legal review. The initial ruling had challenged the legality of how the tariffs were implemented, casting doubt on the broader framework of Trump’s trade strategy.

This legal reprieve allows the administration to continue enforcing duties, including new tariff hikes on steel and aluminum that took effect on June 4, raising rates from 25% to 50%. The move comes as part of Trump’s aggressive push for “reciprocal” tariffs against countries that he claims benefit unfairly from access to the US market.

July Deadline Looms as Global Talks Accelerate

With the 90-day tariff pause set to expire in early July, pressure is mounting on US trading partners to accelerate negotiations. The White House has issued reminders to allies and adversaries alike, warning that failure to reach deals could trigger a fresh round of sweeping tariffs.

So far, only the United Kingdom has finalized a bilateral agreement. Talks with India remain ongoing, with both sides agreeing this week to extend negotiations into early July. The clock is ticking, and the risk of another global tariff surge looms large.

Markets Respond Cautiously to Mixed Signals

Despite progress in the US-China dialogue, markets remain cautious. The dollar held steady following the announcement, reflecting investor hesitation amid conflicting signals—a diplomatic breakthrough on one hand, and aggressive trade enforcement on the other. While the framework deal could restore some predictability to US-China relations, the overall environment remains legally and economically unstable.

The dual headlines—a new diplomatic framework and a court ruling that upholds contested tariffs—underscore the layered complexity of the current US trade strategy. Even as leaders seek to restore order to key economic relationships, the machinery of tariff escalation remains fully operational. Unless the new US-China agreement leads to enforceable commitments and legal clarity, the risk of a renewed trade war remains unresolved. The next four weeks will be critical in determining whether this truce evolves into lasting stability—or a new round of global economic disruption.

Source: Reuters

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FastBull Featured

[Quick Facts]

1. Affected by tariffs and the U.S. president's annexation remarks, the number of travelers between Canada and the U.S. has fallen for five consecutive months

2. Sources indicate that the U.S. and Mexico are close to reaching an agreement on steel tariffs

3. Oil demand will grow strongly over the next 25 years.

4. India and the U.S. are expected to reach a temporary trade agreement

5. Japan's largest opposition party, the Constitutional Democratic Party, advocates lowering the central bank's inflation target.

6. Vučić: We can wait until September to discuss interest rate actions

[News Details]

Affected by tariffs and the U.S. president's annexation remarks, the number of travelers between Canada and the U.S. has fallen for five consecutive months

Preliminary data from Statistics Canada on the 10th (local time) indicates that in May, Canadian outbound travel to the U.S. continued to decline. Cross-border travel volumes between Canada and the U.S. have decreased for the fifth consecutive month. Data shows that in May 2025, the number of Canadian residents returning from the U.S. by air decreased by 24.2% year-over-year, while those returning by automobile declined by 38.1%. Conversely, U.S. residents traveling to Canada by car decreased by 8.4%, and air travel from the U.S. to Canada fell by 0.3% year-over-year. The sustained downturn in cross-border tourism is attributed to factors such as U.S. tariffs and President Trump's annexation remarks. The decline in passenger traffic has also led some airlines to reduce flights to the U.S.

Sources indicate that the U.S. and Mexico are close to reaching an agreement on steel tariffs

According to informed sources, the U.S. and Mexico are nearing an agreement to eliminate the 50% tariff on steel imports below a certain quota. President Trump was not directly involved in the negotiations, which were led by U.S. Secretary of Commerce Lutnick. Under the proposed terms, as long as U.S. importers keep total shipments below a threshold based on historical trade volumes, duty-free importation of Mexican steel will be permitted. The new quota will exceed the limit established during Trump's first term under a similar arrangement. Data from the U.S. Department of Commerce indicate that last year, U.S. steel imports from Mexico totaled approximately 3.2 million tons, representing about 12% of total U.S. steel imports. During Trump's initial presidency, the U.S. and Mexico reached an agreement in 2019 to prevent steel imports from exceeding the average levels observed during 2015-2017.

Oil demand will grow strongly over the next 25 years.

OPEC Secretary General Al Ghais stated at a conference in Canada on Tuesday that, with global population growth, oil demand is expected to remain robust over the next 25 years. The organization projects that from now until 2050, global energy consumption will increase by 24%, with oil demand surpassing 120 million barrels per day. He emphasized that OPEC believes "crude oil demand will not peak in the foreseeable future." Al Ghais highlighted that while OPEC places great importance on climate change mitigation, the focus must remain on emission reduction rather than selecting specific energy sources.

India and the U.S. are expected to reach a temporary trade agreement

Indian government sources indicate that negotiations between Indian and U.S. trade representatives have made progress, focusing on market access for industrial and certain agricultural products, tariff reductions, and non-tariff barriers. Both parties are expected to reach a provisional trade agreement by the end of this month. Sources mention discussions on enhancing bilateral digital trade through improved customs procedures and trade facilitation measures, with ongoing negotiations aimed at early conclusion of initial phases of the trade deal.

Officials add that the next phase of negotiations may address more complex issues, with the goal of signing the first segment of the bilateral trade agreement by September or October. One source states that India has rejected the U.S. request to open markets for wheat, dairy, and corn imports, while offering lower tariffs on high-value U.S. products such as almonds, pistachios, and walnuts. India also demands the U.S. eliminate the 10% baseline tariff, a stance opposed by the U.S., which notes that even the UK must adhere to such provisions in recent bilateral trade agreements.

Japan's largest opposition party, the Constitutional Democratic Party, advocates lowering the central bank's inflation target

The Constitutional Democratic Party of Japan (CDPJ), the country's largest opposition party, released its campaign platform for the July Upper House election on Tuesday, advocating for a reduction in the Bank of Japan's inflation target and granting the central bank greater flexibility in interest rate hikes. In 2013, the Bank of Japan signed a joint statement with the government committing to achieving a 2% inflation target "at the earliest possible time," following then-Prime Minister Shinzo Abe's call for more aggressive measures to combat deflation. The ruling Liberal Democratic Party (LDP), led by Shinzo Abe, has consistently ruled out revising this joint statement, even as inflation has surpassed the 2% target, fueling public discontent and prompting the Bank of Japan to raise interest rates to 0.5%.

The CDPJ's campaign platform proposes amending this joint statement to provide the Bank of Japan with greater flexibility to raise interest rates and to reverse the yen's depreciation. CDPJ leader Noda Yoshihiko stated at a press conference, "We aim to set the inflation target around 0%, with some room for maneuver, allowing the Bank of Japan more flexibility in guiding monetary policy." The minority ruling coalition, led by Prime Minister Shigeru Ishiba, continues to experience low approval ratings, partly due to public dissatisfaction with rising living costs. Some analysts anticipate that the LDP, under Ishiba's leadership, may suffer significant losses in the July election, increasing the likelihood of forming alliances with opposition parties such as the Japanese Communist Party.

Vučić: We can wait until September to discuss interest rate actions

European Central Bank Governing Council member and Croatian National Bank Governor Vučić stated on Monday that the central bank should delay further discussions on interest rate policy until at least September. We believe we are currently in a strong position, and it is prudent to await additional economic data. In my view, obtaining another forecast before determining the next monetary policy move is advisable, with the hope that trade relations will become clearer by then.

[Today's Focus]

UTC+8 17:30 ECB Chief Economist Lane Speaks

UTC+8 20:30 U.S. May CPI

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Forex

China–U.S. Trade War

Greenback Steadies Amid Fragile Optimism

The US dollar held largely steady in Wednesday's early Asian trading after the United States and China concluded two days of high-stakes negotiations in London, producing a framework agreement aimed at reviving the stalled trade truce first outlined in Geneva. The agreement includes China relaxing its export restrictions on rare earths and magnets, while the US will ease certain newly imposed export controls—moves intended to signal goodwill and stabilize bilateral economic relations.

Despite the political breakthrough, market response remained muted. The dollar fell modestly by 0.14% against the yen to 144.770 and slipped 0.13% versus the Swiss franc. The euro stayed flat at $1.1427, and China’s offshore yuan barely moved at 7.1881 per dollar. The dollar index, which tracks the greenback against six major currencies, hovered at 99.068—down more than 8% year-to-date, underscoring investor caution.

Skepticism Remains Over Long-Term Resolution

While the framework deal marks a step toward de-escalation, it stops short of delivering a comprehensive resolution to the US-China trade standoff. Analysts like Ray Attrill of National Australia Bank stressed that trust between Presidents Trump and Xi remains significantly eroded since the earlier Geneva accord, making the implementation and durability of the new framework far from guaranteed.

The absence of concrete enforcement mechanisms or a clear timetable for dismantling tariffs has tempered investor enthusiasm. Markets are cautiously watching whether the agreement leads to a lasting reduction in trade friction or merely delays a deeper rupture. This uncertainty continues to limit the dollar’s upside potential, especially in a climate where US policy unpredictability has weighed heavily on global sentiment.

Macro Focus Shifts to Inflation and Fed Policy

Attention is now turning to the US consumer inflation report due later in the day. With tariffs remaining in place on a broad range of goods, inflation data could reveal how much these policies are feeding into consumer prices. A stronger-than-expected inflation print would complicate the Federal Reserve’s current stance of holding rates steady, and possibly delay anticipated rate cuts.

The Fed is expected to leave interest rates unchanged in its upcoming meeting, but futures markets are pricing in nearly two 25-basis-point cuts by year-end. Any inflationary surprise tied to ongoing trade disruptions could force a reevaluation of that path.

Meanwhile, the British pound inched up to $1.35, recovering some ground ahead of UK Chancellor Rachel Reeves’ upcoming fiscal policy announcements. However, labor market weakness flagged in recent data has exerted pressure on sterling, limiting gains despite investor interest in potential changes to public spending.

The US-China framework agreement has provided markets with a brief moment of calm, helping the dollar stabilize after months of depreciation. Yet structural skepticism about the agreement’s enforceability and broader concerns about US inflation and Federal Reserve policy continue to weigh on sentiment. For now, investors remain cautiously hopeful—but not yet convinced—of a sustainable turning point in US-China trade relations or dollar strength.

Source: Reuters

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Christopher Hayes

Several executives at Rockwell Automation have recently sold shares of the company's common stock, primarily to cover taxes due on vested restricted stock units, as per SEC Form 4 filings.

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Robert L. Buttermore, SVP, Chief Supply Chain Officer, sold 494 shares at a weighted average price of $326.3106 per share, totaling $161,197. Buttermore directly owns 1,964 shares and indirectly owns 275 shares through a Savings Plan after the sale.

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