US China trade talks face rare earth standoff

[WORLD] The United States and China are currently facing a stalemate in their ongoing trade negotiations, despite a temporary tariff pause agreed upon last month. President Trump has accused China of backtracking on this agreement, particularly by delaying export licenses for critical rare earth materials used in industries like automotive and semiconductors. However, U.S. Treasury Secretary Scott Bessent expressed optimism that an upcoming call between Trump and China’s President Xi Jinping could help resolve these tensions, though he acknowledged China’s deliberate or accidental withholding of agreed-upon products.

White House officials have indicated that the Trump-Xi call could take place as soon as this week. Since Trump resumed the presidency, his administration has aggressively applied tariffs, especially on Chinese imports, with rates spiking before the recent cooling-off period. U.S. officials have warned China against “slow-rolling” the deal and believe that tariff disputes—some tied up in court—are far from over. Commerce Secretary Howard Lutnick suggested that even if legal challenges continue, Trump’s tariff strategy will ultimately prevail.

Meanwhile, the U.S. is also escalating its trade stance beyond China, doubling tariffs on steel and aluminum imports, sparking pushback from the European Union. National Economic Council Director Kevin Hassett argued that cheap Chinese steel was undercutting U.S. defense readiness, framing the tariffs as essential to maintaining a robust American steel industry for military needs. As Hassett put it, “If we don’t have steel, then the U.S. isn’t ready.”

Implications for Business, Consumers, and Policy

For businesses, the uncertainty surrounding U.S.-China trade negotiations continues to disrupt supply chains, especially for manufacturers reliant on rare earth materials and imported components. Companies in sectors like automotive, electronics, and defense will need contingency plans in case talks collapse and tariffs snap back to higher levels. Investors, too, face volatility as tariff announcements and political signaling create whiplash across global markets.

For consumers, prolonged trade tensions could translate into higher prices on imported goods, from cars to consumer electronics, and even domestic products that depend on imported raw materials. While some industries may benefit from protective tariffs (like U.S. steel producers), others may face rising input costs, which could ultimately be passed along to shoppers.

On the policy front, the administration’s framing of tariffs as a national security issue signals a shift in tone that broadens the stakes. By linking steel production to military readiness, the White House moves beyond economic arguments to security-based justifications, which may influence future policy debates—not just with China but with allies like the EU. Retaliatory tariffs from Europe also risk opening new trade fronts, complicating diplomatic relationships.

What We Think

This phase of U.S.-China trade talks highlights a familiar pattern: aggressive tariff strategies, temporary de-escalation, followed by renewed tensions when implementation falters. The upcoming Trump-Xi call will be pivotal, but even if it yields short-term fixes, underlying frictions—especially over rare earths and technology dominance—are likely to persist. “Tariffs are not going away,” as Commerce Secretary Lutnick bluntly stated, suggesting that businesses should prepare for a prolonged period of trade uncertainty.

From an editorial perspective, the U.S. government’s decision to tie economic measures to national security narratives is a notable shift. It raises the stakes of trade disputes, making them harder to unwind through simple economic concessions. Additionally, the administration’s willingness to confront allies like the EU suggests a broader willingness to recalibrate global trade relationships, not just the U.S.-China dynamic.

In the near term, we expect markets to remain jittery, particularly in industries most exposed to tariff swings. Companies that proactively diversify supply chains or invest in domestic alternatives may fare better in this climate. Policymakers, meanwhile, will need to balance economic goals with diplomatic and security considerations—a juggling act that risks growing more complicated as trade tensions spread beyond bilateral U.S.-China concerns.