Trump, Xi & Rare Earths: Trade Talk Focus

US President Donald Trump is meeting with Chinese President Xi Jinping in South Korea today to try to find a solution to a series of issues, including the ongoing trade war between the two countries that has rocked the global economy.

Ahead of the meeting between the two leaders, US and Chinese officials have been trying to find common ground on a possible deal between the two sides on trade, but uncertainties remain.

There is no shortage of contradictions

The two leaders are meeting for the first time since Trump returned to the White House in January this year. The last time Trump and Xi met in person was in June 2019 at the G20 summit in the Japanese city of Osaka. Since then, relations between the two countries have been overshadowed by Russia’s invasion of Ukraine, Washington’s growing concerns about China’s technological breakthrough, as well as the lack of balance in the trade balance of the two countries. The talks in South Korea, where Trump has arrived for the Asia-Pacific Economic Cooperation (APEC) summit, provide an opportunity to bring the views of Washington and Beijing closer together, at least on some issues, according to observers. Trump expressed optimism about the upcoming meeting on Wednesday. “I think we will have a great meeting with President Xi of China and many issues will be resolved,” Trump told reporters on Air Force One. He also made it clear that the Taiwan issue, which has long been a stumbling block in Washington-Beijing relations, might not be discussed at the meeting with Xi. “I don’t know if we’re even going to talk about Taiwan. I’m not sure. He might ask about that,” the US president said.

China, which claims Taiwan as its territory, reiterated this week that it does not rule out the possibility of using military force for “reunification” purposes.

Trumps of China

Observers emphasize that an important place in the conversation between Trump and Xi will be the steps taken by China to limit the export of rare earth metals, which has caused confusion in the supply chain. China currently provides about 60% of the world’s rare earth metals mining and more than 90% of their processing, the International Energy Agency estimates. This means that China controls the supply chains of these valuable resources, which are used in the production of armaments, electric cars and other products, and can determine which companies will receive them, according to the BBC. Extraction and processing of rare earth metals is not only an expensive, but also an environmentally polluting process, as a result of which many countries, including the European Union, do not want to carry out these works on their territory. China, on the other hand, has deliberately invested a lot of money in the development of this industry, emphasizes the BBC. In response to Trump’s April announcement of sweeping tariffs on many of the United States’ trading partners, including China, Beijing began restricting exports of several rare earth metals. This month, the restrictions became even stricter, with Beijing justifying them on national security grounds. Observers point out that with them China reacted to Washington’s decision to limit the export of the most advanced semiconductors to China. “Rare earth metals are currently the most effective leverage available to China,” Zhongyuan Liu, a senior fellow at the New York-based Council on Foreign Relations, emphasized in an interview with the Associated Press agency. “The rest of the world does not have enough cheap production capacity readily available,” the researcher added. It should be noted that over the weekend in Kuala Lumpur, the capital of Malaysia, negotiations between the two sides took place, in which China apparently agreed to postpone the new export restrictions on rare earth metals for a year. Presumably, this happened in exchange for Washington’s agreement to freeze the new semiconductor export restrictions, the newspaper “The Guardian” reports.

The issue of tariffs

A separate issue concerns the high tariffs that the two sides, the world’s largest economies, have imposed on each other this year.

The Peterson Institute for International Economics estimates that the US has imposed 57.6% tariffs on Chinese goods, while 32.6% tariffs have been applied to US products in China.

Trump even threatened to impose a 100% tariff on Chinese products this month if negotiations on rare earth metals fail to find a solution. The talks between the two presidents will also discuss China’s role in the process that led to the introduction of the narcotic substance fentanyl into the United States, the production of which uses chemicals made in China. In connection with this, the Trump administration has already applied tariffs to China this year, which will also be discussed at the meeting of the two leaders in South Korea. The Wall Street Journal reported this week that the United States could halve the 20% tariff imposed on China specifically on fentanyl. In return, China would promise to crack down more heavily on exports of the chemicals needed to make the deadly opioid. Trump has said that he will also discuss China’s decision to stop importing US-grown soybeans during the conversation with Xi. China has been the largest buyer of soybeans grown in the United States for years, but since May, in response to Trump’s tariffs, it no longer buys this product from the United States, preferring soybeans from Argentina and Brazil. US farmers, whose support Trump has been able to count on until now, were dissatisfied with such a Chinese decision.