A fragile truce is in danger of being impeded by new tensions, threatening to extend the roller coaster of highs and lows between the US and China as the two trade talks in London this week.
It seems as if the US President Donald Trump’s exaggerated tariff announcement right after assuming office for the second term in January this year, coupled with his decisions to limit the access of Chinese companies to technology and revoke visas of Chinese students have angered the Red Dragon enough to use its ace of spades – holding back on rare earth materials’ export.
The two sides’ agreement in Geneva on May 12 to a 90-day suspension of most of the 100 per cent-plus tariffs they had imposed on each other was followed by a rare Trump-Jinping phone call last week to resolve matters amicably. Trump announced on social media the next day that trade talks would be held on Monday in London.
But, the good times seem to have been short-lived, with the US and China engaging in angry outbursts in the last week of May.
Their latest tipping points are about advanced semiconductors that power artificial intelligence, “rare earths” that are vital to carmakers and other industries, and visas for Chinese students at American universities.
The US Commerce Department issued guidelines saying the use of Ascend AI chips from Huawei, a leading Chinese tech company, could violate US export controls. That’s because the chips were likely developed with American technology despite restrictions on its export to China, the guidance said.
The Chinese government wasn’t pleased. One of its biggest beefs in recent years has been over US moves to limit the access of Chinese companies to technology, and in particular to equipment and processes needed to produce the most advanced semiconductors.
“The Chinese side urges the US side to immediately correct its erroneous practices,” a Commerce Ministry spokesperson said.
The Chinese government started requiring producers to obtain a license to export seven rare earth elements in April. Resulting shortages sent automakers worldwide into a tizzy. As stockpiles ran down, some worried they would have to halt production.
Trump, without mentioning rare earths specifically, took to social media to attack China.
“The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,” Trump posted on May 30.
Anger between the two sides has since simmered down. Although US Commerce Secretary Howard Lutnick wasn’t in Geneva when the tariffs were paused, he will join the talks in London. Analysts take that as a good sign, suggesting the US’ willingness to hear out China’s concerns on export controls.
The Chinese government indicated Saturday that it is addressing the concerns which have come from European companies as well regarding rare earths. A Commerce Ministry statement said it had granted some approvals and “will continue to strengthen the approval of applications that comply with regulations.” The scramble to resolve the rare earth issue shows that China has a strong card to play if it wants to strike back against tariffs or other measures.
Despite student visas not normally figuring in trade talks, a US announcement that it would begin revoking the visas of some Chinese students has emerged as a major thorn in the relationship.
China’s Commerce Ministry raised the issue when asked last week about the accusation that it had violated the consensus reached in Geneva. It replied that the US had undermined the agreement by issuing export control guidelines for AI chips, stopping the sale of chip design software to China and saying it would revoke Chinese student visas.
“The United States has unilaterally provoked new economic and trade frictions,” the ministry said in a statement posted on its website.
US Secretary of State Marco Rubio said in a May 28 statement that the United States would “aggressively revoke visas for Chinese students, including those with connections to the Chinese Communist Party or studying in critical fields.”
More than 2,70,000 Chinese students studied in the US in the 2023-24 academic year.
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