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Femy Francis
15 June 2025 |
The following note was earlier published in The World This Week #315 Vol 7, No 24, 15 June 2025
The US-China:
On Tariffs, Rare Earths and Visas
Femy Francis
What happened?
On 09 June, high-level delegations from the US and China met in London and established a framework to resolve trade tensions. The US delegation was headed by Treasury Secretary Scott Bessent and US Commerce Secretary Howard Lutnick. While China’s delegation consisted of Vice Premier He Lifeng, and Commerce Minister Wang Wentao. After the two-day talks, both countries agreed on a framework to resolve trade tensions, lifting mineral export controls, and to follow through with the Geneva truce on de-escalating tariff tensions. Trump noted that they will work to “open up China to American trade,” as he claimed that a consensus was reached to impose 55 per cent tariffs on China for 10 per cent. China’s Ministry of Commerce informed that they have also approved export licenses for rare earths to the US after the meeting. He Lifeng said: “China approaches these consultations with both sincerity and principle.” The details of the framework are not made public as they await approval by President Donald Trump and Xi Jinping.
What is the background?
First, the road to the London meeting. In March, the Trump administration imposed 20 per cent tariffs on all Chinese imports. An additional 34 per cent under US “reciprocal tariffs” was imposed; China curbed the exports of rare earths to the US while imposing a 10 per cent tariff. In April, Trump imposed fresh 50 per cent tariffs, bringing the total to 104 per cent in total. China retaliated with 84 per cent tariffs, to which the US responded with 145 per cent tariffs. China imposed its final tariff of 125 per cent, urging the US to stop its “unilateral bullying.” A 90-day halt was announced by the Trump administration, after which they agreed to meet in Geneva. In a joint statement US agreed to modify the ad valorem duty for Chinese products, bringing the suggested tariffs imposed by the US to 30 per cent, and China agreed to reduce its tariffs to 10 per cent. They also agreed to establish trade and economic consultations. The Geneva truce talks did not bring any concrete de-escalation between China and the US.
Second, China-US trade relations. Trade between China and the US has increased steadily from USD 2.5 billion in 1979 to USD 688.3 billion in 2024. The US deficit to China is the largest compared to its other trading partners, coming to USD 295 billion in 2024. Since 2018, the US has been working to reduce this gap.. For China, the US is its largest trading partner, while China comes third for the US. Major Chinese exports to the US include transmission equipment, computers, machine parts, batteries, and motor vehicle parts. US exports to China consist of soya beans, vaccines, crude oil, and petroleum.
Third, China’s monopoly of rare earth and the US. China mines 70 per cent of the world’s rare earths and is responsible for 90 per cent of the processing. They are fundamental to producing EVs, electronics, and critical tech production. In April, China announced its rare earth export control measures, aimed at safeguarding national security. Since then, firms are required to submit applications to buy rare earth from China, which, after review, the licensed exporters are allowed by the government to sell. This directly affected the production of several American and European firms, where many had to halt production due to a lack of materials.
Fourth, Trump’s crackdown on Chinese students. Trump administration announced that it will “aggressively” revoke Chinese students' visa applications, citing a national security threat. China accounts for the second-largest number of international students in the US. The peak was in 2020, when 372,532 students were enrolled, but the number has since declined to 277,000 as of 2024. Most of them are self-financed, and are hefty contributor to universities in the US for their higher education, enrolled mostly in STEM fields.
What does it mean?
First, the willingness to negotiate. The meeting opened an avenue for negotiation that was previously sealed shut, due to escalatory retaliation by both countries. The meeting is the second step towards policy-based de-escalation after the Geneva meeting.
Second, the implications of China’s chokehold on rare earths. China’s capacity for mining, refining, and sale of rare earth has proved advantageous for China. For China, its monopoly has awarded it leverage due to the critical nature of the resources. For the US, dependence on China for rare earths marked its limitation. This dominance can be extrapolated to other countries, as China holds the monopoly over the sale of rare earths.
About the Author
Femy Francis is Project Associates at NIAS.
