Trade negotiations between the United States and the People’s Republic of China are set to recommence in London, following fears that their previously established 90-day ceasefire was on the brink of failure. The initiation of these fresh talks came in response to determined calls from Washington, leading to an extended telephone dialogue between US President Trump and his Chinese counterpart, President Xi Jinping. The call lasted for a significant period, appearing to interrupt an escalating cycle of mutual allegations.
The US had voiced claims that the Chinese government was deliberately slowing down the approval process for the exportation of rare earth materials, products essential to several significant sectors of the US industry. China, in response, highlighted evolving bans imposed on the exportation of US-based technology, as well as the potential decision to curtail Chinese students’ access to educational opportunities within the US. Beijing subsequently issued a government statement cautioning that it stood ready to execute ‘decisive and assertive’ steps to safeguard its national interests.
The statement further criticized the escalating controls on US technology exports and the proposed ban on shipping advanced jet engine parts. It identified these acts, alongside the prospective cancellation of visas for many Chinese students based in the US, as ‘one-sided and prejudiced actions’ in direct violation of the Geneva agreement. This agreement previously held a ceasefire on the economic battle, featuring the US’s decision to hike tariffs on all Chinese commodities to 145 percent. The agreement clarified that such tariffs and other restrictive actions would be halted for 90 days to allow for negotiation.
Trump had earlier remarked on the difficulties in reaching an agreement with Xi, even as the possibility of a direct conversation between the two leaders was being contemplated. While the call proceeded, the variation in reactions to its result revealed that no significant resolution had been achieved. Trump, known for portraying himself as an expert deal-maker, described the conversation in optimistic terms while addressing media members at the White House.
In his assertion, Trump remarked that the dialogue concluded very favourably for both nations. After the discussion, there should be no further doubts about the intricacies concerning the rare earth materials, Trump noted. To reporters, he insisted that any complexities had been sorted out, leaving the US in a suitable place regarding the trade pact with China. Nonetheless, the details of such a potential accords remained vague, apart from the announcement that discussions between senior-level teams would be convened urgently.
Eswar Prasad, former senior IMF official on China and a current economics professor at Cornell University, commented on the information asymmetry in the reportage of the conversation from both Beijing and Washington to the Wall Street Journal. The tone of the reports seemed to hint that Xi had maintained a firm position, resulting in Trump failing to secure substantial concessions to his requirements.
Among the immediate demands of the US, lifting export controls over rare-earth elements has become a focal point since this is one of the significant strategies Beijing possesses to counter US pressure. These elements are essential for various high-tech manufacturing processes. China is responsible for nearly 70% of the production of these crucial minerals necessary for the manufacturing of fighter jets, nuclear reactor control rods, and automotive production.
Despite their name, the ‘rare’ earth materials are fairly abundant; however, their processing is an expensive procedure. China effectively monopolizes the refining process, accounting for 90% of the supplies used in high-temperature magnets, for instance. For countries producing these resources, the refinement process leads back to China. With the effective pause in the export of these minerals out of China, automakers are confronted with difficult choices about maintaining current operational levels.
The Wall Street Journal reported that numerous industry associations, representing automakers and parts suppliers alike, have alerted the Trump administration about the possibly imminent decrease or cessation of vehicle production owing to the scarcity of Chinese rare-earth components. The formulation and implementation of policies under Trump’s second term bear distinctive differences from the former: they have intensified economic assaults, potentially leading to the employment of military force, triggered by the inherent sequence of events.
Unlike previous conflicts in Afghanistan, Iraq, or Syria, confronting China presents an entirely different challenge for the US. The US is not dealing merely with a military force but rather an influential power supported by a formidable industrial base and nuclear capabilities. The initial approach has favored economic coercion, initiating with tariffs and proceeding to restrictions on employing American technology. However, this strategy has largely faltered, as observed in a WSJ article last month stating, ‘The US plan to hobble China tech isn’t working.’
China’s surge in tech production has been concerning for the US. It has tried different strategies against China to come out as the winner in the technology race, including sectors like AI, energy, autonomous vehicles, drones, and electric vehicles. Yet, all efforts have been insufficient in providing a decisive edge. The advancements made by China in automating factory production surpass what exist within the US, which includes its electric vehicles’ affordability, and proficiency in consumer drones manufacturing.
These advancements were pointed out by Thomas Friedman, a New York Times columnist, after his trip to China, in an article titled ‘I just saw the future. It was not in America.’ The measures that had been put into place by Trump on April 2 with his so-called reciprocal tariffs fell short when they threatened to destabilize the US financial system, ensuing a 90-day ceasefire for negotiation.
The goal of the US is clear: to curb China’s economic prominence, particularly in the high-tech sector, as this is perceived as the primary threat to the continuous global authority of the US. This view has been consistently declared in various documents released by the military and intelligence establishments, and similar think tanks for years. China’s economic progress is seen as something that needs to be stopped at all costs, even if that means resorting to military measures. Despite the confrontational situation, Beijing remains clear-eyed about its standings and its responses.