The U.S.’s tariffs on Chinese imports will be 30%, down from 145%, while China lowered its tariffs on U.S. goods from 125% to 10%, according to a joint statement. The agreement foreshadows the possibility of a future, much broader trade deal in the future. Both sides said there was a “mechanism” in place for them to facilitate more talks. One of the key questions still left to address is China’s export controls on its rare-earth minerals. China’s outsize role in the global rare-earths market, and the U.S.’s desire to maintain a steady flow of the minerals, make the issue one of the most sensitive parts of the deal.
As the leading exporter of rare-earth minerals, China holds massive influence in the global market for these critical materials. “Dominating this sector is probably one of their most important sources of leverage over the U.S. and over the world,” said Dexter Roberts, nonresident Senior Fellow at the Atlantic Council, a think tank based in Washington, D.C.
For that reason, China will be unlikely to relent on its export controls.
“Now that they punished the U.S. with rare earth [export controls], they’re not going to take away this economic part of their economic arsenal,” Roberts said.
Many of those minerals are key ingredients in advanced manufacturing of products like electric-vehicle batteries, smartphones, and for military applications such as missiles and radar systems. The fact that rare-earth minerals are used in the defense technologies means the exports have national-security implications for both countries, only adding to the complexity and urgency of finding a solution that suits both sides.
While it does have a tense relationship with the U.S. at the moment, China does not want to close it off entirely from the rare-earth minerals market, according to Jeorg Wuttke, partner at the advisory firm DGA-Albright Stonebridge Group and an expert in Chinese trade.
“The Chinese don’t want to cut off the U.S., but they want to threaten it,” he said.
Despite the mounting frustrations between the two countries, China is wary of giving off the appearance of politicizing its rare-earths business because doing so could put off the rest of the world from doing business with it, Wuttke said.
“The Chinese are very aware of the fact they want to come across as reliable supplies to American companies,” Wuttke said. “As much as they dislike American policies, they still want to be engaged with U.S. companies.”
Others, however, see China as being unbothered about applying significant pressure to the U.S. over rare earths.
“I don’t think China’s really worried that if they play too much hardball, they’re suddenly no longer going to be relevant in the rare-earth market,” said Dexter Roberts. “I don’t believe that.”
That means the most likely outcome is further reconciliation—however uneasy—with China. Experts said a deal with China over rare earths could be on the horizon.
“They could announce something on rare earths in the coming days,” Roberts said. “I wouldn’t be surprised.”
