Rare Earths vs. AI: U.S.-China Trade Tensions Persist Despite Truce
The U.S. and China reached a temporary trade understanding in London, but key disputes over rare earths and AI chip exports remain unresolved.
Introduction: Fragile Trade Truce Overshadowed by Deeper Conflicts
A temporary handshake between the U.S. and China at recent trade talks in London offered a brief glimmer of diplomatic progress—but underneath the surface, crucial export battles tied to national security continue to simmer. Despite high-level optimism, Washington and Beijing remain at odds over vital military technologies and mineral resources, dimming hopes for a sweeping trade breakthrough.
Context: Trade Talks Evolve from Tariffs to Tech and Security
The U.S.-China trade conflict, once defined largely by tariffs and trade imbalances, has evolved into a more complex confrontation rooted in geopolitical strategy. What began as disputes over Chinese trade surpluses and opioid exports has now escalated into mutual suspicion over dual-use technologies and rare earth elements critical to defense systems.
Last week’s London summit marked the latest chapter in this long-running saga, with negotiators attempting to build on the tariff-reduction deal reached in Geneva. However, the most pressing issues—export controls on rare earths and advanced artificial intelligence (AI) chips—remained conspicuously unresolved.
Main Developments: AI Chips, Rare Earths, and Stalled Progress
Sources familiar with the London negotiations revealed that China has yet to authorize exports of certain high-grade rare earth magnets, notably those involving samarium, which are essential components in U.S. missile systems and fighter aircraft. These materials are tightly controlled by Beijing and remain a critical leverage point.
At the same time, Washington maintains restrictions on exporting cutting-edge AI semiconductors to China, citing concerns that these technologies could bolster China’s military capabilities. Chinese negotiators reportedly suggested progress on their rare earth export policies could hinge on U.S. flexibility regarding these chip curbs—an implicit linkage that has complicated talks further.
In a sign of limited progress, China did agree to expedite licensing for non-military U.S. companies requesting rare earth exports. According to one source, fast-track licenses valid for six months will be available, and Beijing pledged to create a “green channel” to simplify approvals for vetted American manufacturers. This move was confirmed when JL MAG Rare-Earth, a prominent Chinese supplier, announced it had received export licenses that include the U.S. market.
Still, materials crucial to defense applications remain locked behind China’s regulatory wall.
Official Voices and Expert Commentary
President Donald Trump was quick to hail the outcome in London, calling it a “great deal” during public remarks. “We have everything we need, and we’re going to do very well with it,” he said, while also expressing hope for mutual benefit.
Yet behind closed doors, U.S. officials were cautious. Treasury Secretary Scott Bessent made it clear that there would be no trade-off between chip curbs and rare earth access, saying explicitly that the administration would not engage in a “quid pro quo” with Beijing on such matters.
Ryan Hass, China policy expert at the Brookings Institution, offered a more sobering assessment. “The Trump team is learning, the hard way, that China won’t sign off on another lopsided deal,” Hass noted. “Rare earth dominance gives Beijing an enduring bargaining chip—and they’re using it.”
Impact & Implications: Security Stakes Cloud Economic Future
China’s commanding grip on the global supply and processing of rare earth elements has emerged as a strategic choke point in the U.S.-China rivalry. The stalemate threatens not just trade momentum but also the supply chain stability for critical defense systems.
An earlier tariff-reduction agreement struck in Geneva is now in jeopardy, partly due to Beijing’s tightening grip on critical minerals since April. In response, Washington ramped up its own export controls, limiting sales of semiconductor design tools, aircraft engines, and other dual-use goods.
Adding further uncertainty, U.S. officials are now considering extending current tariffs on Chinese goods for another 90 days beyond the August 10 deadline—an indication that a longer-term pact is still far from reach.
One insider suggested the Trump administration may use the delay to explore invoking Section 301 of the Trade Act as a fallback legal mechanism, should its current tariff approach be overturned in court.
Meanwhile, Chinese analysts remain skeptical about any major breakthrough in the near term. Liu Weidong of the Chinese Academy of Social Sciences remarked, “While both sides might accommodate temporary concerns, the root cause—the structural trade imbalance—won’t be resolved in the short term, or possibly even within Trump’s presidency.”
Conclusion: A Narrow Path Forward in a High-Stakes Standoff
The London agreement reflects a pattern seen repeatedly in U.S.-China relations—modest progress overshadowed by larger unresolved disputes. As Washington and Beijing attempt to navigate a trade relationship increasingly shaped by national security and technological supremacy, the space for genuine cooperation continues to shrink.
Unless both sides are willing to compromise on core strategic interests, the prospect of a stable and lasting trade framework remains distant.
Source: (Reuters)
(Disclaimer: This article is a rewritten journalistic summary based on reported information and unnamed sources cited by Reuters. All statements attributed to individuals or governments are based on publicly available or verified reporting. No part of this report contains speculative or fabricated content.)
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