This is a segment of the Forward Guidance Newsletter. Subscribe to read the full edition.
Representatives from the US and China began second round of trade talks in London at 1pm local time. Kevin Hassett, director of the National Economic Council, told CNBC this morning it should be a “short meeting with a big, strong handshake.”
This is my hope.
President Trump sent his top dogs: Treasury Secretary Scott Bescent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer.
The Chinese delegation includes Lifeeng, the Deputy Prime Minister.
Within less than a month, it was our second US-China conference in a neutral location. About three weeks ago, representatives of both countries negotiated a temporary ceasefire in Geneva.
However, friendship was short-lived, and joint pauses quickly became apparent with the string attached.
On May 30, Trump (via the true society) accused China of violating half of the agreement. Greer later revealed on CNBC that China would “roll slowly” compliance with Geneva trade, particularly when it came to roll back rare earth export restrictions.
Since April 4 (two days after the “liberation date”), China has stopped exporting almost all of its several rare earth metals and magnets. This is important. This is because China mines 60% of its global supply of rare earths and produces 90% of its global supply of magnets. Rare earth elements are essential to technology. They are on the phone, the car, the lights, the batteries, you give it a name.
The US currently has little infrastructure to mine metals domestically, so restrictions are poised to disrupt the US supply chain. Solvent extraction (a difficult process of separating rare earth minerals from one another) has negative environmental effects: high levels of toxic waste, water pollution, etc. This process was actually created in the US in the 1950s, but is expensive and unpopular in the US.
China said it has implemented export restrictions due to the important military applications of rare earths. Trump and his administration have rebutted that China is actually retaliating against higher tariffs.
China has less tended to retreat rare earth restrictions after the US escalation of AI chip export restrictions, according to a WSJ report. Trump’s crackdown on Chinese student visas certainly didn’t help calm the water either.
But on the weekend things started looking up. China on Saturday did not specify which countries were affected, but relaxed some of Saturday’s export restrictions.
Trump on Friday said he expected the London meeting today to be “very good.” Based on his call with Xi Jinping.
