Beijing Puts Six-Month Limit On Rare Earth Exports To US If Trade Talks Collapse Again

Finally some actual detail around what was actually agreed upon during yesterday’s trade talks. 

With questions swirling about the fate of Chinese rare earth exports to the US under the “framework”, the WSJ reports that China is putting a six-month limit on rare-earth export licenses for U.S. automakers and manufacturers, giving Beijing leverage if trade tensions flare up again while adding to uncertainty for American industry.

Chinese negotiators agreed to the temporary restorations of the licenses after the latest round of intense talks with their American counterparts in London, aimed at upholding an interim agreement forged in Geneva last month.

In exchange, the U.S. negotiators agreed to relax some recent restrictions on the sale to China of products such as jet engines and related parts, as well as ethane, a component of natural gas important in manufacturing plastics.

According to people who consult with senior Chinese officials, Beijing wants to keep its chokehold on the supply of such critical commodities as leverage for future negotiations and when, not if, trade relations turns sour again.  

During the London meetings, China agreed to approve rare-earth license applications for U.S. companies right away, pending the signoff of President Trump and Chinese leader Xi Jinping on the trade framework. The earliest an application could be approved is within a week of the two leaders officially signing off on the framework originally established in meetings last month in Geneva.

The WSJ source noted that as China approves the applications, the US will start to drop its countermeasures, including export controls on the jet engines and ethane.

In other words, the US now has six months to create its own rare earths supply chain or else Beijing will be able to use this trump card during the next negotations. 

Trump said Wednesday that the deal with China to restore the trade cease-fire was done, subject to final approval from himself and the Chinese leader. “FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UP FRONT, BY CHINA,” Trump posted on his Truth Social platform, without giving additional details on the Chinese commitment.

China’s grip on rare-earth exports has become a key point of leverage for Beijing in trade negotiations with the U.S. In the wake of the trade truce in Geneva in mid-May that was expected to ease the flow, Washington accused Beijing of slow-walking export licenses. Beijing, in turn, blamed the Trump administration for undermining the Geneva agreement.

As part of the trade framework, the temporary rare-earths licenses Beijing is expected to start issuing immediately will mostly involve elements used in manufacturing electric vehicles, wind turbines, consumer electronics and military equipment.