Why the US-China trade war just got harder to resolve

After two days of meetings in London, trade negotiators from the United States and China emerged with little fanfare but a significant message: the era of tariffs as the defining front in the trade war may be over. What’s emerging in its place is a more opaque and strategic contest—one centered on export controls, rare earth materials, and critical technology flows.

Gone are the headline-grabbing tariff hikes and retaliatory soybean boycotts. In their place: bureaucratically enforced export licensing regimes, ambiguous restrictions on sensitive goods, and geopolitical maneuvering over who controls the “chokepoints” of the 21st-century economy.

While the London discussions reportedly produced a framework for addressing some of the thorniest export restrictions, no concrete commitments or detailed timelines were released. That alone says a lot. Export controls are harder to quantify than tariffs, more entangled with national security, and therefore far less likely to be relaxed quickly—if at all.

Still, the very fact that both sides returned to the table signals concern. US manufacturers are feeling the squeeze from China’s tightening grip on rare earths, which are vital to defense systems, EVs, and consumer electronics. On the other side, Beijing is pushing back against US restrictions on AI chips, semiconductor equipment, and cloud services. Both powers know that the new contest isn’t just about trade—it's about technological supremacy.

If the last energy war was about petroleum, the next one may well be about rare earths. China controls over 70% of global rare earth production and an even greater share of global processing capacity. These 17 elements—despite their name—are not particularly rare, but they are notoriously difficult to extract and refine. They’re critical to magnets in wind turbines, guidance systems in missiles, and high-performance batteries.

The US once led in rare earth production but outsourced much of it in the 1990s due to environmental and cost concerns. Today, it finds itself dangerously reliant on a geopolitical rival for inputs it cannot easily substitute. A 2023 US Geological Survey report noted that the US imports nearly 100% of its processed rare earths, most of it from China.

Beijing has signaled it’s willing to weaponize that dependence. In early 2025, it tightened export licensing requirements for certain rare earth compounds, citing environmental protection. US defense contractors raised alarms, warning that even short-term delays could cripple parts of the aerospace supply chain.

In this context, the London meetings aimed to establish a technical consultation mechanism to manage such disruptions. But with no enforcement teeth or transparency commitments, the risk of future supply shocks remains high.

If rare earths are China’s strategic resource, advanced technology is America’s. Since 2022, the US has steadily expanded its export controls on high-end semiconductor technology, citing national security concerns. The goal: limit China’s access to tools that enable next-generation AI, military targeting systems, and secure communications. These restrictions now affect not only American firms but also foreign entities using US-origin tech, thanks to the extraterritorial reach of US export laws.

In retaliation, China has targeted US firms like Micron and limited exports of gallium and germanium—elements used in advanced chips and solar panels. But it’s clear that Washington holds the stronger hand in this domain, especially when it comes to cutting-edge logic chips and the machines used to fabricate them. However, this is a high-stakes strategy. American companies like Nvidia, Intel, and Applied Materials have lost billions in potential sales due to these curbs. Meanwhile, Chinese firms are accelerating efforts to localize production, with heavy state subsidies and talent recruitment from Taiwan and South Korea.

One outcome of the London talks, according to a senior US official, was an agreement to increase transparency around dual-use tech exports and create a “consultative dialogue” to manage unintended spillovers. But again, the devil is in the enforcement—and neither side has much incentive to let go of these leverage points anytime soon.

This evolution of the US-China trade war—from tariffs to tech—is more strategically significant and potentially more destabilizing.

1. It’s harder to reverse.
Tariffs can be lowered or removed with a simple trade deal. Export controls, by contrast, are often baked into national law, tied to military risk assessments, and reinforced by interagency bureaucracy. Once in place, they’re rarely lifted without major structural change.

2. It affects core industries.
This phase hits the heart of each economy’s growth engine. For China, that’s access to high-end semiconductors and cloud infrastructure. For the US, it’s reliable supply of rare earths and other critical minerals. Any disruption here threatens long-term industrial competitiveness.

3. It’s less visible, more volatile.
Tariffs show up in customs data. Export controls operate in the shadows—applied case by case, often with national security justifications that can’t be publicly verified. This lack of transparency makes miscalculation or escalation more likely.

Multinational firms aren’t waiting for clarity from Washington or Beijing. Many are rethinking their supply chains entirely.

• Diversification of inputs: US-based manufacturers are exploring alternative rare earth sources in Australia, Canada, and even Greenland. But new mines can take 5–10 years to become operational and must still overcome environmental resistance.
• Tech decoupling: Some firms are splitting their China operations from their global tech stack. Amazon Web Services and Microsoft, for example, now run more isolated cloud infrastructures inside China to avoid cross-border compliance risks.
• Nearshoring and reshoring: Mexico, Vietnam, and Malaysia are seeing record levels of foreign direct investment as companies seek to move production closer to home or into more neutral territories.

These are expensive moves, but many firms see them as the cost of long-term resilience.

The London talks didn’t solve the US-China trade conflict—they revealed its new contours. We are now in a strategic phase of the rivalry where trade is weaponized through supply control, and where power lies not in who can raise tariffs fastest, but in who controls the inputs and tools of the future economy. For China, rare earth dominance is both shield and sword. For the US, tech restrictions are a firewall—but also a risk to its own firms.

What makes this moment more precarious is its ambiguity. Export controls operate without clear rules, escalating tensions without the clarity of a tariff table. And unlike past trade battles that ended with compromise, this phase may not end at all. Instead, it’s likely to morph into a managed competition—punctuated by friction, managed through talks, but never fully resolved.

The risk? An era where economic policy becomes permanent brinkmanship. The opportunity? A wake-up call to rebuild resilience—not just in factories, but in the rules that govern global trade.