Chatting About London's Trade Tussle: US-China Negotiations Amid Rare Earths Clash
Beijing employs rare earth elements as leverage tools
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The US and China are still duking it out in London's diplomatic ring, negotiating trade tensions with rare earths and trade restrictions as the main events. But analysts warn that China's got no mad rush for a deal.
Chinese state media announced that US and Chinese representatives are at it again, this time in London's swanky Lancaster House (local time). On Monday, US Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, along with Chinese Vice Premier He Lifeng and Minister of Commerce Wang Wentao, took center stage.
So far, there's no official report on the outcome of these negotiations. US President Donald Trump's economic advisor, Kevin Hassett, told CNBC to expect a quick meeting, a firm handshake, and some good vibes. Trump himself said the US is doing fine with China. "I'm only getting good reports," he beamed.
Talking About Trade Restrictions
If these negotiations bear fruit, it could be a bullish sign for markets, which have been reeling from Trump's tariffs and the constant whirlwind of US-China trade relations. "The market's still holding strong despite Trump's drama. If you pay attention to some of the other comments from Lutnick and Bessent, they sound pretty satisfied with the progress," noted IG analyst Tony Sycamore. But the market's waiting for that belching announcement.
The Main Event: Trade Restrictions
A month ago, both sides agreed to a three-month truce in their trade war. This time, however, trade restrictions are the talk of the town. China's export controls on rare earths are causing jitters around the world. Washington is pushing for China to loosen up, and in return, the US might ease restrictions in tech sectors like computer chips or aircraft components, where China's been hankering for foreign technology.
No Desperate Need for a Deal, Says China?
China produces the lion's share (90%) of the world's rare earths, which are essential for EV production, particularly electric vehicle motors. China's been using these supply restrictions as a bargaining chip in the trade war it started. China's decision last April to halt exports of a bunch of critical minerals and magnets ruffled global supply chains for automakers, aerospace companies, tech firms, and defense contractors worldwide.
China: Casual Baller or Need Godmode Deal?
According to financial services firm Spartan's chief economist Peter Cardillo, a compromise deal is on the cards. But economists at Citi think China might not be in a haste to strike a deal with the US or spark China's economy right away. High-frequency trackers from Citi suggest that shipping activities are still steady, even in June. The decline in container ship departures bound for the US has slowed, while total cargo throughput remained stable last month. Early exports are likely to continue as companies take advantage of the three-month tariff exemption window.
Source: ntv.de, jki/dpa/rts/DJ
Insights:**
- The US-China trade negotiations have been fraught with challenges since 2018, with ongoing tariffs and trade restrictions.
- China controls most of the rare earth elements, which are crucial for the production of advanced electronics.
- The US is pushing China to relax export controls on rare earths in exchange for easing trade restrictions on tech sectors like computer chips or aircraft components.
- China's need for a trade deal is a matter of debate among analysts, with some suggesting that China might not be in a rush to secure a deal due to stable shipping activities.
- A successful trade deal could help stabilize the global economy.
- The ongoing US-China negotiations, taking place in London, involve discussions on employment policies as both nations consider the impact of trade restrictions on various industries, including technology and automotive sectors.
- Despite the continuous talks about trade restrictions and rare earth elements, some analysts argue that China's stable shipping activities indicate a leisurely approach towards securing a deal, suggesting they may not be in a desperate need for a godmode agreement.
