US and Chinese trade negotiators hold talks in London

Talks come after 'positive' phone call between Donald Trump and Xi Jinping

US Treasury Secretary Scott Bessent and China's Vice Premier He Lifeng, during a meeting to discuss trade relations and tariffs in Geneva in May. AFP

The US and China held talks in London on Monday in an effort to preserve a fragile truce on trade.

US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer led the delegation from Washington.

It is understood they met China’s Vice Premier He Lifeng, a respected negotiator, and Commerce Minister Wang Wentao. The talks lasted for several hours and took place in Lancaster House, a historic building close to Buckingham Palace.

There was no early indication on what direction the tariff talks would take, with one British official telling The National “this is quite a sensitive topic”, as both sides worked through issues late into the afternoon.

But the UK attempted to smooth the way in a meeting between British Trade Secretary Jonathan Reynolds and Mr Wang, before the talks with the US delegation began.

US economic adviser Ken Hassett told CNBC on Monday that he was looking for a “handshake” that China would increase the supply of rare earth materials, which are vital to America’s economy and have civilian and military uses.

Chinese and US flags fly outside a technology company in Beijing. AFP

He hoped the discussions in London would be “a short meeting with a big, strong handshake … that’s what we’re expecting”.

There was optimism of progress ahead of the talks, with Beijing on Saturday approving some applications for rare earth exports, while US aviation company Boeing is to begin sending commercial jets to China for the first time since April.

China also "wants the US to rethink immigration curbs on students, restrictions on access to advanced technology including microchips and to make it easier for Chinese tech providers to access US consumers", said Kathleen Brooks, research director at XTB. "The outcome of these discussions will be crucial for market sentiment," she added.

The inclusion of Mr Lutnick, whose agency oversees export controls for the US, shows how central rare earth materials have become. China holds a near-monopoly on rare-earth magnets, a crucial component in electric vehicle motors. Mr Lutnick did not attend the talks in Geneva.

Meanwhile, Wall Street stocks nudged upwards marginally, with investors hoping for significant progress that could help economies of both countries, as well as the global outlook.

Mr He, who led his country's negotiating team in Geneva in May, is at the head of Beijing's team in London.

“The meeting should go very well,” US President Donald Trump said in a post on his Truth Social platform.

While the British government has repeated it is not involved in the content of the discussions, the Prime Minister's official spokesman said “we are a nation that champions free trade”.

"The UK welcomes to these talks," he added. "We're a nation that champions free trade and we have always made it clear that trade wars are in nobody's interests.”

Police officers stand guard at the entrance of Lancaster House, where the trade talks between the US and China took place. AP

The talks in London come a matter of days after Mr Trump and Chinese President Xi Jinping held their first publicly announced phone call since the Republican returned to the White House. Mr Trump said the call, which took place on Thursday, reached a “very positive conclusion”.

Mr Xi was quoted by state news agency Xinhua as saying that “correcting the course of the big ship of Sino-US relations requires us to steer well and set the direction”.

The call came after tension between the countries increased, with Mr Trump accusing Beijing of breaching a tariff de-escalation deal reached in Geneva in May. “We need China to comply with their side of the deal. And so that's what the trade team will be discussing” in London, Ms Leavitt said.

In April, Mr Trump introduced sweeping worldwide tariffs that hit China hardest. At one point, the US imposed levies on China of 145 per cent, as both sides engaged in tit-for-tat escalation. China's countermeasures on US goods reached 125 per cent.

After two days of talks in Switzerland last month, the two sides agreed to reduce their tariffs for 90 days. But differences over certain issues have persisted, including China's restrictions on the export of rare earth minerals used in technology products.

The impact of the tariffs was reflected in the latest official export data released on Monday in Beijing. Exports to the US fell by 12.7 per cent in May, with China shipping $28.8 billion worth in goods. This was down from $33 billion in April, China's General Administration of Customs has said.

Throughout talks with the US, China has opened discussions with other trading partners, including Japan and South Korea, in an effort to build a united front to counter Mr Trump's tariffs.

On Thursday, Beijing turned to Canada, with the sides agreeing to regularise channels of communication after a period of strained relations. China is expected to host a summit with the EU in July, marking 50 years since Beijing and Brussels established diplomatic ties.