US-China Trade Truce Leaves Military-Use Rare Earth Issue Unresolved, Sources Say
The recent U.S.-China trade discussions in London focused on military-use rare earths, intertwining those negotiations with export controls on advanced AI chips. Unresolved issues persist, including the dominance of Chinese production in rare earths, with potential extensions on tariffs looming. Pessimism surrounds the likelihood of achieving a substantial trade agreement before the August deadline. The ongoing tug-of-war reflects the intricate dynamics of U.S.-China relations.
In a recent development, the ongoing U.S.-China trade talks, which unfolded in London last week, have taken a new direction, predominantly focusing on military-use rare earths. Negotiators from China appeared to connect easing export restrictions on key rare earth magnets to the United States’ current limitations on advanced AI chip exports to China. This represents an intriguing shift from previous discussions that began with issues like opioid trafficking and tariff rates, now honing in on the intricacies of export controls.
Moreover, U.S. officials hinted at a possible extension of existing tariffs on Chinese imports beyond the August 10 deadline. This decision, as reported by sources familiar with the talks, suggests that a more comprehensive trade agreement between the two global powerhouses is unlikely to materialize soon. During the conversations, the secrecy was palpable, with individuals opting to remain anonymous amidst tight control over disclosures by both negotiating teams.
President Donald Trump expressed praise for the deal reached, labeling it as “a great deal.” He optimistically stated, “we have everything we need, and we are going to do very well with it. And hopefully, they are too.” In contrast, U.S. Treasury Secretary Scott Bessent clarified that there would be no reciprocal easing of AI chip export curbs for rare earth access, maintaining a tough stance on crucial trade dynamics.
China’s grip on rare earth magnet production, especially those essential for military applications, remains a contentious issue. Holding a crucial position in global rare earth production and processing, China has faced criticism over its previous export restrictions on critical materials. The trade talks of late have been significantly affected by these restrictions, particularly those that emerged in April, prompting U.S. pushbacks including export controls on semi-conductor software and aviation products meant for Chinese use.
During the London negotiations, authorities from China indicated a willingness to expedite approvals for rare earth export applications from non-military U.S. manufacturers, dealing with potentially tens of thousands of pending licenses. These would have a six-month expiration term. Additionally, China proposed establishing a “green channel” specifically for trusted U.S. companies to facilitate faster licensing procedures. Initial reactions were promising, as rare earth producer JL MAG reported receiving licenses covering export to the U.S.
However, China has yet to amend its stance on specialized military-grade rare earths like samarium, which fall outside the expedited process agreed upon in the talks. This limitation remains concerning for industries reliant on various grades of rare earths, including critical players in the automotive sector.
The hurried London meeting, following a call between Trump and Chinese President Xi Jinping, revealed stark contrasts in tariff strategies, with Trump disclosing rates as high as 55% for China whereas China floated 10% on American imports. Trump’s tariff implementation had initially aimed to rectify what he terms a massive trade surplus and to stem the influx of fentanyl into the U.S.
Chinese experts express skepticism over reaching meaningful agreements ahead of the August deadline. Liu Weidong, a specialist in U.S.-China relations, articulated concerns regarding the fundamental trade imbalance, saying, “temporary mutual accommodation of some concerns is possible, but the basic issue of trade imbalance cannot be resolved in this timeframe.”
If the August deadline is extended, it could provide the Trump administration with additional time to pursue a stronger legal framework for imposing higher tariffs under USTR’s Section 301 authority, especially if ongoing legal challenges to tariffs wobble in U.S. courts. The complexity of unresolved matters illustrates the ongoing hurdles for the Trump administration as it navigates deep-seated trade agendas with Beijing, exacerbated by China’s leverage in rare earth negotiations, noted Ryan Hass from the Brookings Institution. He remarked, “The Trump team has taken some hits to realize that securing a trade agreement with China that heavily favors Trump’s objectives is a tall order.”
In summary, the recent U.S.-China trade talks showcased a shift toward military-related rare earth issues, highlighting a complex negotiation landscape. While both sides expressed cautious optimism regarding progress, significant barriers remain, particularly concerning export controls and tariffs. As observers gauge the likelihood of further breakthroughs, the complexities surrounding rare earths continue to pose a challenge for a lasting agreement between the two nations.
Original Source: economictimes.indiatimes.com
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