US and China to hold trade talks in London focusing on export controls

The United States and China will hold second round of trade talks in London on Monday. The focus is going to be on export controls instead of tariffs.

In recent weeks, both the countries have sought to choke the other’s access to critical supply chain elements that they dominate. While the Donald Trump administration has sought to restrict China’s access to semiconductors, jet engines, and certain chemicals and machinery, China has restricted the supply of rare earths, which are critical to manufacture virtually everything from cars to fighter planes and electronic chips.

Both the United States and China have accused the other of violating the trade truce reached last month.

On May 12, the United States and China reached a truce and agreed to reduce tariffs by 115 per cent for 90 days so talks could continue. However, within days, the Trump administration tightened export controls regarding semiconductors. China responded by not relaxing rare earths’ supplies that were halted in April.

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While Trump has said that China has “totally” violated the truce and that Chinese leader Xi Jinping “extremely hard” to make a deal with, China claimed that the United States had “severely violated the common understandings reached in Geneva”.

US-China trade talks to now focus on export controls

Unlike the first round of talks in Switzerland’s Geneva, the second round of talks in London will be focussed on export controls.

The new focus comes as China’s stoppage of rare earths supplies has threatened to bring manufacturing units in the United States and elsewhere, including in India, to a halt, particularly in sectors like automobiles. This would be a major blow to Trump, who has championed revitalising the US manufacturing industry.

The US delegation will be led by Treasury Secretary Scott Bessent but will also include Commerce Secretary Howard Lutnick.

The inclusion of Lutnick, who was not part of talks in Geneva and oversees the US export control regime, reinforces the understanding that talks will be focussed on export controls instead of tariffs. The Chinese delegation will be led by He Lifeng, the vice premier for economic policy who also led the delegations in Geneva.

While American negotiators are expected to press for China to relax curbs on the export of rare earths, Chinese officials are expected to press for the removal of US curbs on China’s access to semiconductors, jet engines, and other critical technologies, according to Wall Street Journal.

There are signs that the two sides may be headed towards achieving an understanding that makes way for an off-ramp. Even though they have accused each other of violating the spirit of talks , Trump said ahead of Monday’s talks that conversations with China “very far advanced” and described a phone call with Xi last week as “very good” and said “there should no longer be any questions respecting the complexity of rare-earth products”.

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In what is seen as a goodwill gesture, China on Saturday said it had granted a number of export licences related rare earths.

“Up until the phone call, both sides were spiraling toward uncontrolled supply-chain warfare. I think the administration played this card to get China to re-engage and back off the magnet restrictions,” Jimmy Goodrich, a China and technology expert and senior adviser to Rand, told Journal.