US-China Trade: Rare Earths & Military Use Remain Unresolved
Stalled trade talks between the US and China underscore escalating tensions over crucial resources. Delve into this News Directory 3 report to learn how disagreements about rare earth magnets, used in military applications, and AI chip export restrictions are impacting the chances of a complete trade deal. Explore China’s strategic leverage and the US response, including potential tariff extensions. The unresolved issues highlight an uncertain future for this vital relationship. Discover what’s next in this evolving trade landscape.
US-China Trade Talks Stall Over Rare Earth Magnets and AI Chips
Updated June 15,2025
A recent round of US-China trade talks in London failed to resolve key export restriction issues,potentially jeopardizing a broader agreement. The primary sticking point involves China’s control over specialized rare earth magnets, crucial for US military applications, and US restrictions on exporting advanced artificial intelligence (AI) chips to China.
China appears to be linking the easing of export controls on rare earth magnets used in fighter jets and missile systems to the US loosening its restrictions on AI chip exports. This marks a shift in the trade discussions, which initially focused on opioid trafficking, tariff rates, and China’s trade surplus.
Sources familiar with the talks indicated that US officials are considering extending existing tariffs on China beyond the August 10 deadline established in Geneva. This suggests that a comprehensive trade deal between the world’s two largest economies is unlikely in the near future. The unresolved issue of rare earth magnets highlights China’s leverage in trade negotiations, given its dominance in the global production, refining, and processing of these critical minerals.
While China has promised to expedite rare earth export applications for non-military US manufacturers and establish a “green channel” for trusted US companies, it has not conceded on specialized rare earths like samarium, essential for military applications. Automakers and other manufacturers primarily require different rare earth magnets, such as dysprosium and terbium.
President Donald Trump described the initial agreement reached in London as a “great deal.” However, Treasury Secretary Scott Bessent stated there would be no “quid pro quo” regarding AI chip exports in exchange for rare earth access.
The Trump governance initially imposed tariffs on China to address the trade imbalance and Beijing’s alleged failure to curb the flow of fentanyl into the US. Chinese analysts express skepticism about achieving further breakthroughs before the August deadline.
“Temporary mutual accommodation of some concerns is possible but the essential issue of the trade imbalance cannot be resolved within this timeframe, and possibly during Trump’s remaining term,” said Liu Weidong, a U.S.-China expert at the Institute of american Studies, Chinese Academy of Social Sciences.
Ryan hass, director of the John L. Thornton China Centre at the Brookings Institution, noted the challenges the Trump administration faces due to China’s control of rare earths and its willingness to use it as leverage.
”It has taken the Trump team a few punches in the nose to recognize that they will no longer be able to secure another trade agreement with China that disproportionately addresses Trump’s priorities,” Hass said.
What’s next
An extension of the August deadline could provide the Trump administration with more time to establish a legal basis for higher tariffs on China, especially if the ongoing legal challenge to the tariffs in US court is unsuccessful. The future of the US-China trade relationship remains uncertain as both sides navigate complex issues related to national security and economic interests.