On June 15th, two anonymous sources disclosed to Reuters that the US-China trade truce agreement reached in London did not address a crucial export restriction area related to national security, which is expected to impact the negotiation of a more comprehensive agreement.
According to these sources familiar with the negotiations, Beijing has not committed to granting export licenses for certain specialized rare earth magnets needed for fighter jets and missile systems for US military suppliers. In the talks, Chinese negotiators sought to link the lifting of export controls on military rare earth magnets to the long-standing US export restrictions on China’s most advanced artificial intelligence chips.
The trade talks in London came after a phone call between President Trump and Chinese President Xi Jinping. Trump had initially imposed a 55% tariff on China as a response to China’s massive trade surplus with the US and its failure to stop the flow of potent opioid fentanyl into the United States.
The anonymous sources indicated that US officials hinted at considering extending the existing tariffs on China beyond the August 10 deadline agreed upon last month in Geneva for another 90 days. This suggests that a more enduring trade agreement between the world’s two largest economies is unlikely to be reached before that deadline.
Reuters has not received comments from the White House, State Department, or Commerce Department, and neither has the Chinese Ministry of Foreign Affairs or Commerce responded to requests for comment.
An informed source familiar with the negotiations in London suggested that extending the original August deadline allows the Trump administration more time to pursue other legal remedies under the authority of the US Trade Representative’s Office, including imposing higher tariffs on China.
Due to concerns that the advanced artificial intelligence chips acquired by China could also be used for military purposes, the US has maintained export restrictions on these chips. The initial negotiations revolved around opioid trafficking, tariff rates, and China’s trade surplus with the US, but later shifted focus to export controls.
China’s control over rare earth magnets required for weapons systems has become a key point of contention in US-China trade negotiations.
China dominates global rare earth production and holds almost a monopoly in refining and processing.
An agreement reached last month in Geneva aimed to lower bilateral tariffs from triple digits but was hindered by Beijing’s restrictions on the export of critical minerals starting in April.
This prompted the Trump administration to take corresponding export control measures, banning the export of semiconductor design software, jet engines for Chinese-made airplanes, and other goods to China.
One source mentioned that during the London talks, the Chinese side promised to expedite the review of tens of thousands of pending rare earth export applications from non-military US manufacturers. These permits have a validity period of six months. Beijing also proposed establishing a “green channel” to hasten the approval of permits from trusted US companies.
Chinese rare earth magnet producer JL Mag Rare-Earth Co (300748.SZ) announced on Wednesday that it has obtained export licenses, including from the United States, and the Chinese Ministry of Commerce has confirmed the approval of some “compliant” export permit applications.
However, the sources mentioned that China has not made concessions regarding special rare earths, including scandium, which are used for military purposes and are not within the scope of quick approvals reached in London. Automakers and other manufacturers largely require other rare earth magnets, including dysprosium and terbium.
US Treasury Secretary Scott Bessent stated that relaxing export restrictions on Chinese artificial intelligence chips would not be a “bargaining chip” to secure a rare earth supply.
Ryan Hass, Director of the John L. Thornton China Center at the Brookings Institution, believes that these unresolved issues highlight the challenges the Trump administration faces in advancing its trade agenda with China, as Beijing controls rare earths and seeks to leverage this as a negotiating chip.
(This article is based on relevant reports from Reuters)