China’s stronghold over the rare earth minerals market continues to give it significant leverage over the United States, despite a potential trade agreement being reached between the two nations just before an upcoming meeting between President Donald Trump and Chinese President Xi Jinping. The highly anticipated meeting, the first of Trump’s second term, is scheduled to take place on Thursday during the annual Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, South Korea.
The trade war between the world’s top two economies has escalated, with tariffs exceeding 100 percent. This conflict has raised concerns about its impact on the global economy and underscores China’s willingness to use its economic strengths as bargaining tools in response to threats from the White House.
Optimism emerged days before the Trump-Xi meeting as top officials from both countries hinted at a potential trade deal after months of negotiations in various locations, including Geneva and Madrid. U.S. Treasury Secretary Scott Bessent, accompanied by U.S. trade representative Jamieson Greer and Chinese Vice-Premier He Lifeng, announced a “substantial framework” at the Association of Southeast Asian Nations summit, signaling a positive outlook for the upcoming discussions.
Despite the positive developments, uncertainties persist in the U.S.-China relationship. The temporary truce in the trade war does not imply disarmament, according to Mary Lovely from the Peterson Institute for International Economics. While specific details of the agreement remain unclear, it includes provisions such as the transfer of TikTok’s U.S. operations, the potential resumption of soybean purchases by China, and the postponement of export controls on rare earth minerals for a year, a crucial issue for the U.S.
The agreement is seen as a crucial step towards stabilizing the bilateral relationship between the two economic giants, with both leaders demonstrating a pragmatic approach to addressing key issues. However, challenges remain unresolved, such as trade imbalances, China’s overcapacity, security matters in the South China Sea, and technological competition.
Amid speculations and diplomatic maneuvers, both Trump and Xi are preparing for a crucial meeting that could have far-reaching implications. China’s recent expansion of export rules on rare earth minerals, a sector where it holds a near-monopoly, underscores its strategic advantage in global supply chains. In response, the U.S. is striving to enhance its capabilities in critical minerals mining and processing through agreements with countries like Japan and Australia.
The domestic political landscapes in both countries further influence the leaders’ positions ahead of the meeting. Xi’s consolidation of power amidst economic challenges and Trump’s administration facing potential shutdowns highlight the complex dynamics at play. Ultimately, the outcome of the Trump-Xi meeting holds significant implications not only for the two nations but also for the global economy and stability.
