The updated trade deal between the US and China has failed to address the core issue of national security-related export restrictions, a situation that threatens a more comprehensive agreement.
Edition Reuters writes that Beijing has not committed to granting export permits for some rare-earth magnets that are needed by US military suppliers for fighter jets and missile systems. Washington maintains restrictions on exports to China of advanced artificial intelligence chips due to concerns that they will be used in the military sector.
At talks in London, Chinese negotiators appeared to link progress in lifting export controls on rare earth metals for the military sector to US restrictions on exports of advanced chips to China, marking a new twist in trade talks.
In addition, US officials have also signaled that they intend to extend existing tariffs on Chinese goods for another 90 days beyond August 10, when the Geneva agreement expires, the sources said, suggesting a more permanent trade deal between the world's largest economies is unlikely.
However, China's ban on rare earth metals, which are essential for weapons systems, remains a potential flashpoint. Beijing dominates the world's production of rare earth elements and has virtually monopolized their processing and refining.
At talks in London, China promised to expedite the processing of rare earth export applications from non-military U.S. producers, out of the tens of thousands currently pending, one of the sources said. The licenses would be valid for six months. Beijing also proposed creating a “green channel” to speed up approval of licenses from trusted U.S. companies.
The initial signals were positive. However, China has not made any concessions on special rare earth elements, including samarium, which are needed for military purposes and do not fall under the fast-track procedure agreed in London, the sources said.
The current agreement does not solve the main problem
Chinese analysts are pessimistic about the likelihood of further breakouts before August 10.
"Temporary mutual settlement of some issues is possible, but the fundamental problem of trade imbalance cannot be resolved in this timeframe and, perhaps, during the remaining term of Trump's term," — said Liu Weidong, an expert on the United States and China at the Institute of American Studies of the Chinese Academy of Social Sciences.
The extension of the agreed deadline could give the Trump administration more time to prepare an alternative legal justification for imposing higher tariffs on China if the current US leader loses the ongoing litigation over the tariffs in a US court, the source said.
The unresolved issues underscore the difficulty the Trump administration faces in advancing its trade agenda with China because of Beijing's control over rare earth metals and its willingness to use it as leverage to pressure Washington, said Ryan Hass, director of the John L. Thornton China Center at the Brookings Institution.
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