The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Gabriel Rubin

WASHINGTON, June 11 (Reuters Breakingviews) - U.S. and Chinese trade negotiators are no longer driving off a cliff, but they’re still on the wrong road. The world’s two largest economies reached an agreement in London on Tuesday that roughly returns to a month-old truce halting a vicious spiral of tit-for-tat trade levies. In the interim, both found the other’s key pain points: on one side, the overwhelming control of rare earth minerals exerted by the People’s Republic; on the other, technology exports and students at American universities. While they may now draw back from intolerable escalation, the crux of the crisis remains. There is no clear off-ramp for the Trump administration to lower 55% tariffs on Chinese goods, while other trading partners, like the European Union, remain waiting on the sidelines.

For all the threats of decoupling the world’s two largest economies, Wednesday’s concessions show that they cannot tolerate a mutual trade Armageddon. China’s stranglehold on the supply chain for rare earths — where it accounts for 70% of global mining, 85% of refining capacity and about 90% of metal alloy and magnet production involving them, according to AlixPartners data — is a potent cudgel. Indeed, the White House accused the country of violating the terms of a pact struck in Geneva by continuing to limit supplies, setting the stage for current talks.

The U.S. also has obvious leverage: despite rapid advances by the likes of Huawei in the realm of cutting-edge silicon, American companies including Nvidia NVDA.O still hold the crown in producing microchips that are key to building artificial intelligence. That extends to software for designing chips, subject to recently heightened restrictions. There’s also access to U.S. universities for Chinese students, which Trump said his negotiators agreed to restore.

Thing is, all these curbs are new, added on top of the brute-force tariff push. Trump’s focus on foreign student visas has as much to do with his campaign against Harvard University as the trade war. Thursday’s agreement creates an illusion of progress ahead of July 9, when punishingly steep levies introduced on “Liberation Day” are set to resume. Rather than reaching a comprehensive “90 deals in 90 days” as suggested by trade adviser Peter Navarro, the White House has a handshake deal with the U.K. and China. Truces may be fragile, too: China is limiting new export licenses to six months, keeping a threat on the table, the Wall Street Journal reported. Pulling back from further escalation, with key details still to be filled in, leaves little else changed.

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CONTEXT NEWS

President Donald Trump said on June 11 that the U.S. had reached a deal with China to preserve a trade truce struck between the countries in Geneva in May. Beijing will supply magnets and rare earth minerals while U.S. concessions include allowing Chinese students in its colleges and universities.

The agreement allows the U.S. to charge a 55% tariff on imported Chinese goods. This includes a 10% baseline "reciprocal" tariff, a 20% tariff for fentanyl trafficking and a 25% tariff reflecting pre-existing tariffs. China would charge a 10% tariff on U.S. imports, according to the White House.

(Editing by Jonathan Guilford; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on RUBIN/gabriel.rubin@thomsonreuters.com))