China and the US have made significant advancements in stabilizing their economic relationship, after two days of high-level talks in London culminated in a "principled framework" aimed at implementing prior agreements, according to Li Chenggang, China's vice minister of Commerce and International Trade Representative. Li's comments followed negotiations held June 10 in London, as reported in a video clip by state media, China News.

Commodity industry sources said the ongoing talks are more concentrated on China's rare earth exports and the US' core technology exports, and not so much on commodity tariffs.

"But any breakthrough on these topics [may also] help ease the tariffs on commodities trade, which will be a win-win situation for both economies," a Beijing-based energy analyst said.

"While this is positive for markets, the lack of further details, no fixed timelines for further talks or decisions, and frictions on other issues, still leave much to be resolved," said Eric Yep, an analyst with S&P Global Commodity Insights.

"It is not the time to price in any impact yet, we need to wait until there is anything concrete, it may take a few months," said an energy trader with a Chinese state-owned giant.

This view is echoed by industrial sources more broadly in the commodity sector, including crude oil, LNG, LPG, solar PV and copper scrap.

At 3:18 pm Singapore time (0718 GMT), the ICE August Brent crude futures contract was up 3 cents/b (0.04%) from the previous close at $66.90/b while the NYMEX July light sweet crude contract was up 9 cents/b (0.14%) from the previous close at $65.07/b.

The discussions were described as "professional, rational, substantive, and candid," and were conducted in line with the consensus reached during the June 5 phone call between the two heads of state, as well as earlier discussions in Geneva, according to the minister.

On May 12 in Geneva, the countries agreed to lower the reciprocal tariffs by 115 percentage points for 90 days starting from May 14, and to develop a mechanism for regular trade talks.

"The progress achieved during the London meeting will further enhance mutual trust between China and the US, promote the stable and healthy development of bilateral economic and trade relations, and contribute positively to the global economy," Li said.

After months of escalating trade tensions, the talks can potentially help reduce friction between the world's two largest economies.

Ethane

Among the different commodities, the US' ethane exports attracted most attention as Washington recently asked exporters to seek permits for exports to China when tensions around rare earth and core technology reheated, despite Beijing exempting the product from additional tariffs.

Washington's move has set a pause on outflows to China until the US exporters secure a license from the Bureau of Industry and Security, part of the US Department of Commerce.

According to the US Energy Information Administration, ethane production in the US rose to a record 2.83 million b/d in 2024, with exports hitting 492,000 b/d, of which about 46% went to China. Meanwhile, China's ethane-fed chemical plants fully rely on US ethane on top of domestic production.

Sources with those Chinese ethylene makers that use imported US ethane said they expect a breakthrough to primarily help to relax Washington's ethane export controls.

Soybeans

The largest US export to China is soybeans, with trade in the commodity having faced disruptions due to tariff uncertainty along with other US grains and meats since April.

When the 90-day truce between the two countries was announced in May, US farmer sentiment climbed to its highest level in four years as farmers took a more optimistic view of US agricultural export prospects, combined with a less negative view of the tariff impact on 2025 farm income, according to a Purdue University study.

China buys more than 50% of the US' annual soybean exports, which amounted to around 27 million mt in 2024, according to US customs data.

Data from the US Department of Agriculture showed that soybean export sales nearly halved for the period April 11-17, compared with the week before, the first full week reporting period after the escalation in tensions between the two countries.

US agricultural exports to China dropped to $29.25 billion in 2024 from $42.8 billion in 2022. Corn exports fell to $561 million from $2.6 billion in 2023. Soybeans levels held at $12.8 billion, but nevertheless lost ground to Brazil, which now supplies 74% of China's soybeans.

LNG

Although the US and China have agreed to significantly reduce tariffs following their initial trade talks in Geneva in May, China's tariffs on US LNG remain as high as 25%, which continues to deter US LNG imports into China.

According to shipping data from S&P Global Commodity Insights, China has suspended imports of US LNG for approximately four months due to the steep tariffs.

Market participants said that the specifics of any agreement between China and the US remain uncertain, adding that it will be essential to wait for the details of the agreement to be finalized and announced before considering any countermeasures.

Solar PV products

Market sources told Platts that, despite the formulation of "the principled framework", the solar photovoltaic industry would still face lots of sector-specific tariffs and trade barriers.

China's direct exports of solar modules to the US have already become very limited, as significant tariffs have been imposed in the past decade, long before the recent US-China tariff war.

In recent years, China has leveraged four intermediate manufacturing hubs in Southeast Asia -- namely Cambodia, Malaysia, Thailand, and Vietnam -- to process semi-finished solar products from China and export them to the US market indirectly.

On April 21, the US Commerce Department finalized antidumping and countervailing duty rates on solar cells from the four Southeast Asian countries.

Copper scrap

China's copper scrap imports from US are unlikely to see an obvious increase, despite an easing of trade frictions, industry sources said.

"The profit margin for copper scrap imports is very low and it's very likely that even a 3% import tariff won't [see imports picking up]," said a southern China-based source.

Part of Chinese importers haven't resumed imports from the US yet, relying on securing materials from other countries in Europe and Southeast Asia.

China's retaliatory tariffs on US imports

*China's base tariffs on ethane, propane, butane and wheat are 1%, coking coal and soybeans 3%, beef and pork 12%, poultry 20%.

Source: Government statements, sources