U.S.-China trade talks are set to take place in London this week, amid a backdrop of escalating disputes that threaten the precarious truce achieved in their ongoing trade war.
The two countries previously reached an agreement in Geneva last month, implementing a 90-day suspension of most tariffs over 100% that had been imposed on each other during their trade conflict, which sparked fears of a potential recession.
However, recent developments have reignited tensions, particularly concerning advanced semiconductors used in artificial intelligence, as well as the critical rare earth elements essential for various industries, including automotive manufacturing.
In a bid to ease relations, President Donald Trump engaged in a phone conversation with Chinese leader Xi Jinping last Thursday.
The following day, President Trump announced via social media that trade discussions would commence on Monday in London.
The friction between the two nations intensified shortly after the agreement in Geneva on May 12, when the U.S. Commerce Department issued guidance indicating that the usage of Ascend AI chips from Huawei, a prominent Chinese tech company, could contravene U.S. export controls.
The guidance stated that these chips were likely developed using American technology, which is subject to restrictions on export to China.
The Chinese government expressed its dissatisfaction, as one of its primary grievances in recent years has been the U.S. attempts to limit Chinese companies’ access to advanced technology, especially concerning the latest semiconductor production techniques.
A spokesperson for China’s Commerce Ministry urged the U.S. to promptly rectify its ‘erroneous practices.’
While U.S. Commerce Secretary Howard Lutnick was not present during the Geneva discussions, his participation in the London meetings may indicate a willingness on the U.S. side to listen to China’s concerns regarding export controls.
Additionally, China maintains a strategic advantage in the mining and processing of rare earth elements.
These materials are not only crucial for the automotive industry but are also used in the manufacturing of a variety of products, from robotics to military equipment.
In April, the Chinese government began requiring licenses for the export of seven rare earth elements, leading to global shortages that unsettled automakers.
With declining stockpiles, some manufacturers expressed worries about potential production halts.
President Trump, without specifically naming rare earths, criticized China on social media, stating, ‘The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,’ on May 30.
In response, the Chinese government suggested they were addressing the concerns raised both by the U.S. and European companies, with a Commerce Ministry statement noting that approvals had been granted and continued strengthening of application regulations would take place.
The ongoing scrutiny of the rare earth situation illustrates that China holds significant leverage if it chooses to retaliate against U.S. tariffs or other measures.
In a separate but related issue, the expiration of student visas has emerged as a contentious topic in the trade dialogues.
The U.S. announced plans to revoke visas for certain Chinese students, which has further strained bilateral relations.
China’s Commerce Ministry raised this concern when approached about the allegations of violating the Geneva consensus, asserting that the U.S. had undermined the agreement by instituting export control guidelines for AI chips, halting the sale of chip design software to China, and revoking student visas.
In a statement, the ministry accused the United States of ‘unilaterally provoking new economic and trade frictions.’
U.S. Secretary of State Marco Rubio declared on May 28 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.’
This year, over 270,000 Chinese students enrolled in U.S. institutions for the 2023-24 academic year, underscoring the significant impact of visa policies on educational and diplomatic relations between the two nations.
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