The United States and China successfully concluded a two-day discussion in London, establishing a framework towards implementing their mutually agreed upon trade truce. This follows a consensus reached in Geneva a few month prior, and a productive phone conversation between the two nations’ heads of states last week. Both parties now need to take the proposed framework back to their leaders for approval. Once given the green light, the framework’s phase of implementation will begin.
While details of the deal between the global heavyweights were not fully revealed, each has agreed to de-escalate export controls on key commodities and technologies significant to the other. A critical component of this accord is the resolution of China’s export restrictions on rare earth minerals and magnets to the United States, these being vital to various industries.
The United States had previously expressed dissatisfaction with China, citing backtracking on its Geneva commitment to release constraints on rare earth exports. As a consequence, America prohibited the sale of chip design software to China, and threatened to severely restrict student visas for Chinese nationals. However, restrictions on top-tier Nvidia chips, integral for powering AI systems, will continue.
China’s state media remained vague about the details of the entire negotiation, but highlighted the country’s approach to the talks. Vice Premier He Lifeng stated that both nations should commit to their pledges in action, extending goodwill and demonstrating real efforts to uphold their commitments. He underlined the importance of protecting the results won through dialogues.
He also pointed out, clear-eyed, the damaging effects of a trade war, asserting that China, while not desiring a fight, would not back down if pushed. This sentiment encapsulates the seriousness of the negotiations and the strategic importance of these talks held at the ornate Lancaster House in the heart of London.
These talks underscored the increasingly central role that export controls have come to play in the global trade set-to between the world’s two largest economies. Rare earth minerals and magnets, key components in a spectrum of products that range from automobiles to advanced military aircraft, are largely controlled by China. The country’s global monopoly on these critical resources gives it a significant leverage.,
During a recent phone conversation between the US and China, an agreement was made to revive the supply chain of these rare earth minerals from China to America, but the specifics of the deal remain unknown. China holds the power over the speed and volume of this key resource distribution.
China’s export of rare earths has dramatically dropped since it imposed new licensing rules on certain minerals in response to Trump’s tariffs in early April. This has led to a worldwide disruption in industries reliant on these materials such as electronics, defense, energy, and automobile manufacturing.
The White House took further steps which included denying Chinese companies access to software that designs semiconductors. It also cautioned American businesses against using AI chips created by China’s national technology champion. These actions were seen by China as breaches of the initial Geneva agreement.
In spite of a grace period following the Geneva consensus, during which both nations agreed to temporarily lift damaging tariffs on each other to negotiate a more comprehensive trade deal, China’s exports to the US declined sharply. This renewed trade friction and emphasized the need for continued dialogs.
The battle over advanced tech has been a long-standing issue between the two nations. The US has implemented policies restricting China’s accessibility to chip-related technologies over years, aiming to curtail Beijing’s militaristic expansion and advancements in AI fueled by American innovation.
During Trump’s administration, restrictions were imposed specifically targeting companies like Huawei, constraining chip sales among others. Biden perpetuated this approach, reinforcing regulations preventing the sale of advanced semiconductors to China, due to rising concerns about their military potential.
The ongoing trade restrictions have put significant stress on China’s strategic industries prioritized by Xi Jinping, particularly the semiconductor and AI sectors. However, China has shown resilience with companies like Huawei rebounding, signifying Beijing’s ambitious plans for technological domination. Despite initial setbacks due to US embargos, Huawei launched a handset powered by advanced chips in 2023, technology that the US thought was blockaded.