Agreeing upon a blueprint to put their trade ceasefire into action, top representatives from the United States and China ended a two-day negotiation session in London. This meeting comes in an attempt to alleviate increasing trade tensions and relax export constraints that have unsettled worldwide production. The trade delegates from both nations consented, in theory, to a strategy for implementing the mutual agreement secured during the last round of dialogues in Geneva and subsequent calls between the heads of both nations.
Nothing specific about the negotiated agreement has been divulged at this point by either party. However, it has been jointly agreed that export restrictions on items and technologies pivotal to each party will be eliminated as part of the framework agreement. Issues relating to China’s limitations on rare earth mineral and magnet exports to the United States are also set to be sorted out fundamentally.
The US had imposed export restrictions on chip design software as a consequence of China breaking its Geneva promise to reduce rare earth exports. The US has also threatened to ‘strictly revoke’ visas for Chinese students. Despite these measures, the US will continue to enforce constraints on high-end Nvidia chips, vital for powering artificial intelligence systems.
Chinese media entities have released further comments about the discussions that took place in London, but these also lacked concrete details. Vice Premier He Lifeng emphasized that both nations should interact reciprocally, support their promises with concrete actions, and showcase sincere efforts to meet their commitments, collectively protecting the hard-earned results of their dialogues. He further added that there are no victors in a trade war and although China is not inclined to confront, it does not fear conflict.
These discussions, which occurred in the picturesque Lancaster House in London’s center, highlighted the escalating importance of export controls in the trade battle between these two monolithic economies. They also shed light on the powerful leverage Beijing has from its control over the rare earth supply chain and its increasing readiness to utilize this advantage to motivate the US towards loosening its export restrictions on Chinese commodities.
Rare earth minerals and their derived magnets serve as essential components in numerous industries, from automobile manufacturing to military technology, with China ensconced near the top of global suppliers. These materials are indispensable to various American industries, thus having the ability to control their distribution gives China significant bargaining power.
After a recent phone call between US President Donald Trump and China’s Xi Jinping, Trump announced that Xi consented to restore rare earth mineral and magnet shipments, though Trump did not specify the magnitude or timeline of this decision. Shipment of these minerals from China to other countries witnessed a sharp decrease following Beijing’s implementation of new licensing rules as a retaliation to Trump’s tariffs.
The standoff over high-end technology has been a extensively debated issue. In the past, Washington has escalated its efforts to limit China’s access to chip-related technologies as a strategy to prevent Beijing from exploiting American advancements to boost its military and AI capabilities. During his first term, President Trump imposed targeted restrictions on companies like Huawei, restricting chip sales to these entities.
President Joe Biden further tightened these measures in 2022 by blocking advanced semiconductor sales to China due to fears of potential military usage. Such restrictions expanded to include restraints on sales of equipment for chip production, high-bandwidth memory chips, and products produced outside the US with American technology, all in an effort to curb China’s technological advances.
These increasing restrictions have exerted immense pressure on key areas China’s President Xi has deemed essential, encompassing semiconductors and AI. Nevertheless, in recent years, Huawei, China’s telecommunications and electronics powerhouse, has emerged as a national forerunner. Beijing places high hopes on Huawei to spearhead innovation in these sectors.
Huawei’s smartphone division initially suffered due to these US restrictions, however it made an astonishing turnaround in 2023. This recovery was driven by a new handset powered by advanced chips – a technological development the US administration believed it had locked out.
The founder of Huawei, in a rare interview, downplayed the impact of American technology restrictions on both China and Huawei. While he acknowledged that Huawei’s chip technology is still a generation behind the US, he also expressed that China’s present demand can be fulfilled utilizing ‘packaging or stacking’, an industry term for combining microchips.