Trade Clashes in London: China Wields Rare Earths as a Weapon
Beijing leverages rare earth elements for tactical coercion equipment
The United States and China are locked in another round of trade talks in London today, according to Chinese state media. The exact time isn’t specified, but US officials expect negotiations to kick off in the morning (London time).
Representatives from the world’s two economic titans met at Lancaster House in the British capital yesterday afternoon (local time). Among those present were US Treasury Secretary Scott Bessent and Trade Minister Howard Lutnick, as well as Chinese Vice-Premier He Lifeng and Trade Minister Wang Wentao.
Economic Kurfuffles Ahead?
No official announcements of the talks' outcomes have been made yet. Speaking to CNBC, Trump’s economic advisor, Kevin Hassett, said he expects a quick meeting with a firm handshake. Trump mentioned in Washington that the U.S. is doing great with China. “I’m only hearing good reports,” he added.
Trade Tussles: The Main Topic
Any progress in the negotiations could steady the markets, as Trump’s tariffs and trade spat with China have mainly hurt the world's two biggest economies, slowing down global growth. Tony Sycamore, a market analyst at IG, said, "The fact that we're still near record highs suggests the market is accepting Trump's statements." Still, markets are on tenterhooks for concrete news, adds Sycamore.
About a month ago, both sides agreed in Geneva to a 90-day truce in their trade war and substantial cuts in tariffs on goods from each other’s countries. This time, however, trade sanctions appear to be the central issue. China’s restrictions on rare earth exports are causing unease in the U.S. and other countries, with Washington pushing for easing. In return, the U.S. might alleviate its trade restrictions, such as those affecting computer chips or aircraft components, where China heavily depends on foreign technology.
China: No Urgent Need for a Deal?
China produces approximately 90% of the world's rare earths, crucial for the production of vehicles, particularly electric vehicle motors. China is exploiting supply restrictions as a bargaining chip in the ongoing trade war started by Trump. China stopped exporting a broad range of critical minerals and magnets in April, causing disruptions in supply chains for automakers, aerospace companies, semiconductor firms, and defense contractors across the globe.
According to Peter Cardillo, chief economist at financial services firm Spartan, an agreement between the two nations is likely, alleviating some of the uncertainty regarding tariffs. However, economists at Citi estimate that China may not feel an immediate need to strike a deal with the U.S. or prop up the economy. High-frequency trackers from Citi indicate that shipping activities have held steady into June. The decline in container ship departures for the U.S. has eased, while total cargo throughput remained stable in June, as per Citi. Early exports are likely to continue as businesses take advantage of the 90-day tariff exemption period.
Sources: ntv.de, jki/dpa/rts/DJ
- China
- USA
- Trade disputes
- Rare earths
- London
Further Insights:
- US-China trade tensions have lasted since 2018, with both countries imposing tariffs on each other’s goods.
- Rare earths are valuable in various high-tech products like electronics and defense equipment.
- Discussions between the U.S. and China can happen in various international forums, but the negotiations are usually held directly between the two nations or through international organizations like the WTO.
- The ongoing trade talks between the United States and China in London today, revolving around trade sanctions and the restriction of rare earth exports by China, could influence the global economy, particularly in sectors reliant on these minerals for production, such as the automotive, aerospace, semiconductor, and defense industries.
- Despite the uncertainty surrounding the trade dispute, the employment policies of both governments, especially those relating to technology sectors like computer chips and aircraft components, might be significantly affected by any concessions made during the negotiations, potentially impacting employment within these industries on a global scale.
