[By Guancha Network, Qi Qian]

The impact of China's rare earth export control is rapidly becoming apparent. "The U.S. faces two choices: either supply chain disruption or negotiation with China. It will be painful." Amid the constant complaints from the industry, the U.S. government is really in a hurry.

On May 9th, Bloomberg cited reports that the Trump administration is considering significantly reducing tariffs on China while hoping that China takes similar measures and lifts restrictions on rare earth exports to the U.S. Notably, on the same day, the National Export Control Coordination Mechanism Office deployed a multi-department special operation to crack down on strategic mineral smuggling exports.

"Requesting China to lift export restrictions is an important goal for the U.S."

According to informed sources, one of the key goals on the U.S. wish list is to ensure that China lifts restrictions on rare earths used for magnet production exports to the U.S. In addition, there is the issue of fentanyl.

Informed sources also said that the situation is changing rapidly, meaning it is uncertain whether tariffs can be reduced in the short term.

White House spokesperson Kush Desai responded: "The sole objective of these negotiations is to advance President Trump's 'America First' economic agenda to achieve fair and reciprocal trade relations. Any discussion about 'targeted' tariff rates is mere baseless speculation."

According to information released by the State Council on May 9th, the National Export Control Coordination Mechanism Office organized the Ministry of Commerce, Ministry of Public Security, Ministry of State Security, General Administration of Customs, Supreme People's Court, Supreme People's Procuratorate, and State Post Bureau to hold a field meeting in Shenzhen, Guangdong Province, to deploy various specific tasks for the special operation to combat smuggling exports of strategic minerals.

The meeting pointed out that strengthening the export control of strategic mineral resources is crucial to national security and development interests. Since the state implemented export control over gallium, germanium, antimony, tungsten, medium-heavy rare earths, and other strategic minerals, some overseas entities have colluded with illegal personnel within the country to constantly innovate smuggling export methods, attempting to evade crackdowns. To prevent illegal outflow of strategic minerals, curb smuggling trends, safeguard national security, promote compliant trade, and ensure stable production and supply chains, combating smuggling exports of strategic minerals has become an urgent and important task at present.

In 2023, China accounted for more than 60% of global rare earth production, and its refined supply accounted for 92%. CNN chart

On April 2nd, Trump imposed so-called "reciprocal tariffs" worldwide, with tariffs on China as high as 145%.

China immediately introduced a series of targeted countermeasures, including increasing tariffs and implementing export controls on seven categories of heavy rare earth-related items such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. Last December, China announced strict control over exports of gallium, germanium, antimony, superhard materials, graphite, and related dual-use items to the U.S.

CNN once published an article stating that rare earths are one of China's most powerful weapons in this round of trade wars. The current situation is that China has played this "powerful" card, and Trump "almost has no counterattack capability." The report pointed out that the impact of China's rare earth export control is rapidly becoming apparent, causing production disruptions in critical industries such as American defense, energy, and high-tech.

In the past 30 years, China has always maintained dominance in rare earth mining and refining.

According to data from the International Energy Agency, in 2023, China accounted for more than 60% of global rare earth mine production, but its control over the processing stage accounted for 92% of global production, almost monopolizing the processing sector globally. The United States Geological Survey also stated that between 2020 and 2023, 70% of the U.S.'s rare earth compound and metal imports came from China.

All industries in the U.S. are complaining, and China has made its stance clear.

Due to President Trump's insistence on imposing a 145% tariff on China and targeting Chinese ships, many U.S. industry analysts warned that freight volumes at U.S. ports would significantly decrease, severely impacting the U.S. economy and consumers' lives. Bloomberg mentioned that given warnings of rising prices this summer and empty shelves, even significant reductions may not alleviate the pain for U.S. consumers.

On May 8th, Trump responded to the Sino-U.S. talks, saying that the currently imposed 145% tariff on China cannot be raised further, and it will inevitably be reduced in the future. He said, "It's already at 145%, and we know it will come down. I think we'll have a good weekend with China."

U.S. Commerce Secretary Lutnick said in an interview, "I believe that easing tensions and bringing interest rates down to their possible and appropriate levels is Treasury Secretary Bessent's goal. I believe it is also the goal of the Chinese representatives. The president hopes to see a good result, a world that eases tensions, brings us back together, and then jointly strives for a significant agreement."

Bessent also said on the 7th that they are "considering" exempting tariffs on children's car seats, strollers, cribs, and other essential baby travel items.

On April 24th, Trump and Bessent had lunch with Norwegian Prime Minister Støre at the White House. Visual China

Trump's announced tariff policy caused turmoil in global financial markets and rapidly escalated Sino-U.S. trade tensions. Wendy Cutler, former senior U.S. trade negotiator and current researcher at the Asia Society Policy Institute, said, "Even if they halve the tariffs on China, it still far exceeds what we've seen before. This will severely restrict trade."

According to Bloomberg Economics calculations, the current average U.S. external tariff rate has risen by more than 20 percentage points, reaching 23%. If the tariff rate on China were reduced to 34%, as announced on April 2nd, the increase in the average tariff rate would drop to 12.6 percentage points. However, this would still be the largest tariff increase since 1930, and regardless, the economic pain might still be significant.

Bloomberg pointed out that at the current tariff rate, these high tariffs will reduce U.S. GDP by 2.9% and core inflation by 1.7% within two to three years. If the tariffs were halved, the drag on the economy would be halved, but for an economy that had already contracted in the first quarter prior to the imposition of tariffs, it would still be difficult to bear.

At the same time, China is cautiously approaching the upcoming economic and trade talks between the two countries in Switzerland.

On the 8th, Ministry of Commerce spokesperson He Yadong said that China's consistent stance of firmly opposing the U.S.'s abuse of tariffs remains unchanged. If the U.S. wants to resolve issues through negotiations, it must face the serious negative impacts of unilateral tariff measures on itself and the world, face international trade rules, fairness and justice, and the rational voices of all sectors, show sincerity in negotiations, prepare to correct mistakes, cancel unilateral tariff increases, take action, and move toward each other with China to resolve concerns through equal consultations.

He Yadong pointed out that if one says one thing and does another, or even attempts to use negotiations as a pretext to continue coercion and extortion, China will not agree under any circumstances and will not sacrifice principles or fairness and justice to reach any agreement.

"The U.S. must proactively reduce tariffs on China because it initiated the trade war," said Song Hong, deputy director of the Institute of Economics at the Chinese Academy of Social Sciences. If the U.S. reduces tariffs, China is likely to take similar measures. However, he noted that given the U.S.'s long-standing designation of China as a strategic competitor, tariffs are unlikely to be completely eliminated. "China no longer fantasizes about the U.S. changing its policies toward China."

Wu Xinbo, director of the Center for American Studies at Fudan University, said that through these talks, China "will understand whether the U.S. is serious and prepared for meaningful discussions." He also said, "Negotiations will be a long and complex process, and we have just begun; we should not be overly optimistic."

Why did China choose to negotiate with the U.S. at this time? Yu Yuan Tan Tian pointed out in a recent article on the 9th that after fully considering global expectations, China's interests, calls from the U.S. industry and consumers, China decided to agree to contact the U.S. "Negotiation does not mean sacrificing interests. China's interests are inviolable, which is the foundation for China's willingness to talk."

This article is an exclusive piece by Guancha Network and cannot be reprinted without permission.

Original source: https://www.toutiao.com/article/7502464365912752640/

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