The United States and Mexico are moving closer to a trade agreement that would limit the impact of President Donald Trump’s proposed 50% tariffs on steel, by allowing a portion of imports to enter the US duty-free, according to a report by Bloomberg.

The arrangement, still under negotiation, would set a cap on Mexican steel shipments based on historical trade volumes, effectively reviving a framework used during Trump’s first term but with a higher threshold.

People familiar with the discussions cited in the report say the cap would be designed to “prevent surges” in steel imports without establishing a fixed numerical quota.

This model aims to reassure US steelmakers while providing flexibility for Mexican exporters and US end-users reliant on Mexican supply chains.

Commerce Secretary Howard Lutnick is leading the talks, which remain private.

Trump has not yet been directly involved, but his approval would be required for the deal to move forward.

Negotiators say the broad outlines of the agreement have been agreed upon, but final details are still being hammered out.

Cleveland-Cliffs, Nucor share prices fall in response

News of the potential softening in tariff policy affected markets late Tuesday.

Shares of US steelmakers, including Cleveland-Cliffs and Nucor, dropped sharply, declining by more than 7% and 4% respectively.

The Mexican peso, which had been under pressure earlier in the session, trimmed some losses after the news broke.

Mexico’s Economy Minister Marcelo Ebrard has been vocal in rejecting the premise behind the proposed 50% tariffs.

Speaking at an event on Tuesday, he said the US actually exports more steel to Mexico than it imports, calling the tariffs unjustified.

Ebrard said he made this case in meetings with US officials last week in Washington, where he was photographed shaking hands with Lutnick.

“We are waiting for their response, because on Friday we gave them the details of Mexico’s argument and we are right,” Ebrard told reporters Tuesday.

“So we are going to wait for their response which will probably be this very week.”

Steel deal part of broader US-Mexico realignment

The talks are unfolding against a backdrop of broader diplomatic repositioning between Trump and Mexican President Claudia Sheinbaum.

Washington has demanded tougher action from Mexico on immigration and drug trafficking, areas where cooperation remains uneasy.

Homeland Security Secretary Kristi Noem recently accused Sheinbaum of encouraging anti-deportation protests in Los Angeles—an allegation Sheinbaum strongly denied as “absolutely false.”

The prospective steel deal also comes just ahead of the Group of Seven summit in Canada, where Trump and Sheinbaum are expected to meet, potentially giving the agreement geopolitical significance as well as economic impact.

Steel trade tensions linger as industries diverge

According to Commerce Department data, the US imported about 3.2 million metric tons of steel from Mexico in 2023—roughly 12% of total US steel imports.

The 2019 agreement between the two nations during Trump’s previous term set import limits based on 2015-2017 averages, and the new framework is expected to exceed those levels while maintaining safeguards against sharp increases.

Trump’s announcement last week to double steel tariffs came alongside his endorsement of Nippon Steel’s proposed acquisition of US Steel Corp., positioning the move as a measure to protect domestic industry.

While the tariff hike has pleased steel producers, downstream manufacturers and construction firms have warned it could increase costs and disrupt supply chains.

If finalized, the agreement could mark a calibrated policy shift—protecting US industry while avoiding full-scale trade friction with a key partner.

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Wednesday saw oil prices dip, as markets analysed the results of US-China trade discussions, which still await President Donald Trump’s review. 

Market pressures included weak oil demand from China coupled with increased output from OPEC+.

“Despite recent strength, and what could be viewed as a potential breakout, oil has yet to push out of a trading range which has been building over the last two months,” said David Morrison, senior market analyst at Trade Nation. 

Prices appear to be pausing as they await a fresh catalyst. 

This seems likely to come from supply commentary, or trade developments, particularly any news from US-China trade talks. 

At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $65.07 a barrel, largely unchanged from the previous close. Brent crude oil on the Intercontinental Exchange was also flat at $66.89 a barrel. 

Both benchmarks had fallen earlier in the session on Wednesday. 

Experts believe that oil prices have experienced brief periods of bullishness, but those have not materialised into substantial rallies.

From a bullish standpoint, the daily moving average divergence convergence appears generally constructive. It has returned to and continues to rise above the neutral level. 

“But crude has been in this situation many times over the past year or so. And rally attempts have tended to be snuffed out relatively quickly,” Morrison said. 

Trade negotiations

Following intense two-day London talks, US Commerce Secretary Howard Lutnick reported Tuesday that American and Chinese officials have established a framework aimed at restoring their trade agreement and addressing China’s export limitations on rare earth minerals and magnets.

Trump will be briefed on the outcome before approving it, Lutnick added.

Meanwhile, a federal appeals court handed Trump a victory Tuesday, deciding his “Liberation Day” tariffs could remain in place for now. 

This reverses a prior decision by the US Court of International Trade, which had deemed the tariffs’ enactment illegal and blocked their implementation last month.

The oil market remains cautious amid the increasingly complex trade narratives of the Trump administration. 

Supply

Simultaneously, regarding supply, OPEC+ intends to raise oil output by 411,000 barrels daily in July, continuing their fourth consecutive month of easing production cuts. 

Some experts, however, question if regional demand will be sufficient to absorb this additional supply.

The summer driving season in the US is likely to generate some demand for fuel in the world’s biggest consumer of crude oil. 

However, experts remain skeptical about whether global oil demand could meet OPEC’s supply increases. 

Eight countries from the OPEC+ group, including Saudi Arabia and Russia have been raising output of oil by 411,000 barrels a day each month since May. 

EIA predicts fall in US production

According to the latest Short-Term Energy Outlook, published late on Tuesday, the Energy Information Administration (EIA) has adjusted its 2026 projections for US crude oil production downward. 

The EIA now forecasts a 50,000 barrel per day year-on-year decrease in 2026, bringing output to 13.37 million barrels per day. 

Notably, this projected decline would mark the first annual drop in US production since 2021, when production was impacted by the COVID-19 pandemic.

For 2025, annual output growth is projected to remain constant at 210,000 barrels per day year-over-year.

“The decline isn’t too surprising, given the recent slowdown in drilling activity,” Warren Patterson, head of commodities strategy at ING Group, said. 

A 33-rig decline over the past six weeks has pushed the US oil rig count to 442, marking its lowest point since October 2021, amid the current period of low prices.

ING’s Patterson added:

Given our view that oil prices will be lower towards the end of this year, there’s scope for further downward revisions in US crude oil output estimates for next year.

Uncertainties in refined product market

Amid rising uncertainty in the refined products market, the European Commission, led by President Ursula von der Leyen, has proposed an import ban on goods derived from Russian crude oil.

The European Union has prohibited imports of Russian crude oil and refined products.

However, refined products derived from Russian crude are still entering the bloc through third-party countries.

“This would mostly put refined product imports from India and Turkey at risk,” Patterson said. 

India and Turkiye are significant importers of Russian crude oil, collectively receiving 1.77 million barrels per day in the first quarter of 2025, as per LSEG data. 

Concurrently, India and Turkiye are also exporters of refined petroleum products to the European Union, which imported over 350,000 barrels daily from these two nations. 

Patterson added:

Such a move would lead to yet another shift in refined product trade flows. But the Commission implementing such a ban would be difficult, given that refiners blend different types of crude oil.

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Everyone wants to believe the trade war is cooling off. But that’s unlikely.

After 2 days of negotiation in what was supposed to be a “quick meeting” in London, US and Chinese officials announced a “preliminary framework” to calm tensions and revive the Geneva truce. 

But underneath the handshake headlines, the reality doesn’t seem so positive. This is not a real reset, but a break. 

And although still not officially signed, the deal could present some opportunities for investors, depending on the real outcome.

What was actually agreed?

The London talks produced a “non-binding and provisional framework”, meant to salvage the Geneva deal from collapse. But just like last month’s talks, the details remain vague. 

The key outcomes were China agreeing to fast-track rare earth magnet shipments and the US agreeing to loosen some export controls. 

The delegations will now present the proposal to Presidents Trump and Xi Jinping for final approval. If they sign off, it will hold off the tariff snapback set for August 10. 

If not, tariffs of up to 145% on US imports from China will return. China would hit back with up to 125% on American goods.

US Commerce Secretary Howard Lutnick said the agreement “puts meat on the bones” of May’s Geneva consensus. But he also admitted it offers little clarity beyond that. 

Chinese negotiator Li Chenggang echoed that sentiment. The talks were described as “in-depth and candid,” yet concrete deliverables remain sparse.

Markets barely moved. The MSCI Asia Pacific index rose by 0.57% on the news. US equity futures dipped slightly. The yuan was flat. 

This reaction clearly shows that investors remain conservative. This was only a relief that things hadn’t worsened.

Why Europe Took the First Hit

The most immediate economic damage from this US–China deal is surprisingly showing up in Stuttgart and Mladá Boleslav. 

In April, China placed global export controls on seven categories of rare earth minerals.

These include neodymium and dysprosium, key inputs for electric vehicle motors and military-grade equipment. 

This wasn’t just aimed at Washington. Europe got caught in the crossfire.

The European auto sector, especially EV manufacturers in Germany and the Czech Republic, is now facing higher input costs and severe sourcing uncertainty. 

With China holding two thirds of the global market for processed heavy rare earths, Europe’s dependence has turned into a liability. 

Although the measures were initially seen as retaliation against the US, their global scope has left EU producers exposed.

This fallout comes just weeks before the EU-China summit in Beijing, where both sides are expected to address trade tensions and access to critical minerals.

The real stakes: chips vs magnets

What’s happening isn’t just about tariffs or trade balances. It’s about leverage. 

The US holds the keys to advanced chip design, AI software, and cutting-edge aviation technology. 

China controls the critical materials used to build them. Around 90% of global rare earth magnet supply comes from China. 

These minerals aren’t just used in cars. They’re essential in everything from missiles to wind turbines to smartphones.

In response to Beijing’s rare earth curbs, Washington revoked export licenses for chip design tools and chemicals used in semiconductor manufacturing.

The aim was to halt China’s technological rise. The result has been a new kind of economic warfare where access is the main weapon.

This framework agreement, if approved, would ease the blockade on both sides. But no one is dismantling the architecture of economic containment. 

US officials haven’t lifted foundational controls. And China is still insisting that any long-term deal must allow it access to key technologies and global markets.

The London agreement skirts all of that.

Is this about trade or politics?

This conflict is no longer just economic. It’s deeply political. Trump wants a deal he can sell to voters as proof he’s tough and effective. 

Xi wants an agreement he can promote at home as equal and dignified. Neither wants to be seen conceding ground.

That’s why this deal avoids anything permanent. It delays decisions. It gives both leaders a way to say: we’re in control.

But the economic cost is mounting. China’s exports to the US fell 34.5% in May, the worst drop since early 2020. 

US importers are still facing higher costs, and while the Federal Reserve isn’t sounding alarms yet, business confidence is fragile. 

The World Bank just lowered its 2025 global growth forecast to 2.3%, citing trade uncertainty as a key risk.

Neither side can force the other to fold. The US has economic power, but Xi has political endurance. 

Beijing is betting that Trump is facing more domestic pressure and needs a resolution more urgently than China does.

Any potential winners?

Rare earth miners outside of China, particularly in Australia, Canada, and the US, stand to gain as countries look to diversify supply. 

Semiconductor firms may benefit if export controls ease, though only marginally for now.

Aerospace companies like Boeing and defense contractors reliant on rare earths might see some relief. But no one should bank on a major rally.

European automakers are clear losers. They’re paying higher costs without any policy relief.

Chinese exporters are also in trouble, especially in consumer electronics, where US demand has plunged. 

And for small manufacturers caught between two national security regimes, the message is simple: you don’t matter in this fight.

What’s worse, the trust deficit is growing. Every time a deal like this falls apart, markets become more skeptical that the next one will hold. 

Investors are starting to price in a world where supply chains are permanently politicized.

The London deal is a patch instead of a fix. If approved, it buys 60 more days of quiet. 

But the forces driving this conflict, which are technology, pride, and politics, aren’t going away.

Ultimately the trade war isn’t ending anytime soon. It’s just evolving into something smarter, slower, and harder to reverse.

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India’s Maruti Suzuki, facing rare earth shortages, has significantly reduced its initial electric vehicle e-Vitara production goals by two-thirds, as revealed in a document, highlighting ongoing supply chain disruptions within the automotive sector due to China’s export restrictions, Reuters reported.

Reuters has reviewed a company document indicating that India’s leading car manufacturer, despite initially stating on Monday that the ongoing supply chain issues had not affected them, has adjusted its production targets for the e-Vitara. 

The revised plan outlines the production of approximately 8,200 e-Vitaras from April to September, down from the initial target of 26,500 units.

Shortages in the rare earth materials crucial for magnets and various high-tech components were cited as the reason behind the constraints on supply.

The document still stated that Maruti intends to achieve its annual EV production goal of 67,000 units for the fiscal year ending March 2026 by increasing output in the months ahead.

China’s dominance

China’s imposition of restrictions on the export of specific rare earth minerals has sent shockwaves through the international automotive manufacturing sector, triggering widespread alarm among major players. 

These companies have publicly expressed grave concerns about the potential for severe disruptions to their intricate and globally interconnected supply chains. 

While some firms based in the United States, across various nations in Europe, and within Japan have reported a gradual easing of supply pressures, attributed to their successful acquisition of necessary export licenses directly from Beijing authorities, India remains conspicuously in a state of limbo. 

Indian industries are still awaiting the critical regulatory approvals from China, leading to escalating anxieties about the imminent threat of potential production halts and significant economic setbacks. 

This geopolitical tension has underscored the vulnerability of global industries to trade disputes and resource control, further emphasising the strategic importance of diversifying supply chains and developing alternative sources for essential materials. 

The situation also highlights the complex interplay between international trade policies, national interests, and industrial stability in the modern world economy.

Maruti’s e-Vitara

The e-Vitara, unveiled with significant anticipation at India’s car show this January, is vital for Maruti Suzuki’s electric vehicle strategy in the nation. 

This launch represents Maruti’s debut in a market segment the Indian government, led by Prime Minister Narendra Modi, aims to expand to 30% of all car sales by 2030, a substantial increase from the approximately 2.5% recorded last year.

A production delay for Maruti Suzuki’s electric SUV, the e-Vitara, has surfaced due to a rare earths supply issue.

This could negatively affect Suzuki Motor, as India is its primary revenue market and a key electric vehicle manufacturing center. 

Most of the India-made e-Vitaras are intended for export to Europe and Japan by mid-2025.

Despite these concerns, Maruti stated that the rare earths problem would not significantly delay the e-Vitara’s launch. 

Chair RC Bhargava had also noted that production is currently unaffected. Neither Maruti nor Suzuki responded to requests for further comments.

Following the announcement, Maruti’s stock price on the Indian stock exchange experienced a decline, dropping as much as 1.4% to reach its lowest point of the day.

The company has not yet commenced bookings for the e-Vitara.

Some analysts have expressed concern that Maruti’s EV launch is delayed in the world’s third-largest car market, where Tesla is also anticipated to start sales this year.

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