An essentially unenforceable agreement that will keep the sword of Damocles forged out of rare earths merely dangling over America’s head for another twelve months beats more unpleasant alternatives. And where that topic is concerned, it was probably the best that could be expected from the deal sketched out between Xi Jinping and Donald Trump on Thursday. The brutal reality is that China’s domination of the production and supply of rare earths and rare earth products is going to last longer than another year and that there is every chance that that sword (in the shape of a revived export ban) will drop, probably sooner rather than later. The Trump administration knows that and is rightly taking some innovative and much-needed steps (most recently a deal struck with Australia) to end this dangerous vulnerability and will do more. If anything calls for a revival of the spirit of Operation Warp Speed, this is it, and nothing that occurred Thursday changes that.
China will also end its boycott (or, for some goods, reduced purchases) of U.S. agricultural products. This ought to come, in particular, as a relief to U.S. soybean farmers, and the timing is helpful in the wake of the recent Argentine bailout, which was perceived by many of them as rescuing a competitor. Although Beijing has yet to confirm the details, it seems that China has agreed to buy 12 million metric tons of U.S. soybeans this season and 25 million tons for each of the next three years, the latter a number only about 10 percent lower than in recent years, if well below previous peaks. China has diversified its sources of supply to reduce geopolitical risk, and that will not change. There’s a lesson there.
Of course, there was a price to be paid for these Chinese concessions, but it did not seem excessive. The tariff on Chinese imports will fall by ten percentage points to 47 percent, from a post “liberation day” peak of 157 percent. This will be welcome news to some American businesses and consumers. However, it is unlikely to do much to slow down the broader decoupling of the American and Chinese economies, a process that should continue.
There seems to be no movement on the question of the U.S. relaxing its restrictions on high-tech exports to China, which is how it should be. Meanwhile, China continues to maintain its boycott of all Nvidia semiconductors, an issue that Trump seems content to leave to Beijing and the company to resolve for themselves for now. The boycott is not one that worries us. And the idea, approved by the president in August, that Nvidia should be allowed to export H20 chips to China, in exchange for an export license fee of 15 percent, strikes us as bizarre as well as unwise.
The separate question of whether China should be permitted to buy a version of Nvidia’s advanced Blackwell chips did not apparently arise. Good. In an era of fierce Sino-American technological competition, we see no advantage in sharing American know-how with China. The argument that such restrictions will only encourage the Chinese in their efforts to develop equally powerful chips of their own is, we believe, irrelevant. They will try to do so anyway, and there is no sense in making that task any easier.
Posting on Truth Social, Trump said that “China also agreed that they will begin the process of purchasing American Energy. In fact, a very large scale transaction may take place concerning the purchase of Oil and Gas from the Great State of Alaska.” The idea behind this may be to cut Chinese purchases of Russian oil and gas, which seems optimistic but worth trying.
In the same post, Trump described the meeting with Xi as “truly great,” which, unsurprisingly, may be overstating it. Nevertheless, if the result is a relatively cordial trade truce, a resumption, even if only temporary, of the supply of rare earths, and the establishment of better lines of communication between Beijing and Washington, then talks were well worth having. But they should not be allowed to create the impression that China is in any sense our friend.