China’s control over the rare earth minerals market gives it significant leverage over the U.S., even though the two countries are set to discuss a trade deal at an upcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping. The meeting, scheduled during the annual Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, South Korea, marks the leaders’ first encounter of Trump’s second term.
The trade war between the world’s top two economies has escalated, with tariffs exceeding 100 per cent, posing a threat to the global economy. China has demonstrated its willingness to utilize its strengths as bargaining tools in response to economic challenges from the White House.
Recent announcements from top officials of both countries hinted at a potential trade agreement just before the Trump-Xi meeting. U.S. Treasury Secretary Scott Bessent, U.S. trade representative Jamieson Greer, and Chinese Vice-Premier He Lifeng disclosed a substantial framework deal at the Association of Southeast Asian Nations summit in Kuala Lumpur.
While optimism surrounds the possibility of averting tariffs, uncertainties persist due to the fluctuating nature of U.S.-China relations. The agreement involves various aspects, including the potential transfer of TikTok’s U.S. operations, resuming soybean purchases by China from U.S. farmers, and delaying China’s export controls on rare earth minerals for a year.
The truce remains fragile, with both countries retaining the option to impose tariffs or use domestic industries as leverage. The deal signifies a mutual desire to stabilize the bilateral relationship, acknowledging the importance of avoiding a breakdown in communication.
As Trump and Xi prepare to meet, key issues such as trade imbalances, China’s overcapacity, security in the South China Sea, and competition in technology are likely to remain unresolved. The leaders face challenges in negotiating comprehensive agreements due to deep-seated mutual distrust.
The upcoming meeting represents a critical juncture in U.S.-China relations, with both leaders demonstrating strategic positioning in the lead-up to the discussions. China’s recent expansion of export rules on rare earth minerals underscores its dominance in this critical sector, prompting the U.S. to explore partnerships to secure critical minerals supplies.
Domestic political landscapes further shape the leaders’ positions, with Xi emphasizing self-reliance in technology amid economic challenges, while Trump navigates the U.S. government shutdown. The outcome of the Trump-Xi meeting carries significant economic implications, with global stakeholders hoping for a peaceful resolution to avoid disruptions in the international arena.