A new round of high-stakes trade negotiations between the United States and China kicked off today in London, with both sides racing to preserve a fragile truce that was brokered just last month.🤝

The talks come after a critical phone call between President Donald Trump and Chinese leader Xi Jinping finally set the stage for progress, following weeks of escalating tensions and trade barbs. At the heart of the current standoff: rare earth minerals—those 17 vital elements essential for everything from smartphones and electric vehicles to missiles and fighter jets.

Rare earth minerals may sound obscure, but they’re at the core of modern technology. Despite being more common than gold, they’re tricky and environmentally damaging to extract and process. China controls 90% of global rare earth refining capacity, giving it a near-monopoly that’s hard to replicate. 🌐

Last month’s Geneva meeting brought a rare moment of optimism. Trump and Xi agreed to a 90-day suspension of tariffs—US duties on Chinese goods dropped from 145% to 30%—but that goodwill quickly soured. Two big sticking points remain: China’s tight grip over rare earth exports and Washington’s moves to choke off China’s access to American semiconductor technology.

Monday’s London meeting has thus become a focal point for the world. “China’s control over rare earth supply has become a calibrated yet assertive tool for strategic influence,” Robin Xing, Morgan Stanley’s chief China economist, noted in a report this morning. 💡

Indeed, China’s rare earths power play isn’t new. In April, Beijing imposed a licensing regime for seven rare earths and key magnets, requiring every shipment to be approved and documented for intended use. While Geneva’s truce was supposed to roll back these restrictions, Beijing’s slow-moving approvals have raised eyebrows and deep frustrations in Washington. 🔍

US officials aren’t mincing words about their worries. Kevin Hassett, head of the National Economic Council, told CBS’s Face the Nation on Sunday that rare earth exports have “picked up” but not enough to meet what the US believes was promised in Geneva.

In a Monday interview with CNBC, Hassett said the White House is especially worried about supply disruptions for major American industries. “If China slow-rolls exports because of licensing red tape, it could disrupt production for US companies like automakers,” he warned. 🚗

That’s no small threat: rare earths power magnets in electric vehicles, wind turbines, and even military jets. Recognizing this leverage, President Trump personally called Xi to insist on faster shipments—and Xi reportedly agreed to speed things up. 💬

Beijing, for its part, signaled over the weekend that it’s ready to engage. A spokesperson for China’s Commerce Ministry said it had “approved a certain number of compliant applications” and was willing to “enhance communication and dialogue.” But so far, the pace of approvals remains far below what the US expects.

On Friday, the American Chamber of Commerce in China said some Chinese suppliers to US firms have been granted six-month export licenses. Reuters reported that key players like GM, Ford, and Stellantis (Jeep’s parent company) have also secured temporary licenses. 🚛

Yet analysts warn that these licenses are a temporary Band-Aid, not a permanent fix. Leah Fahy, an economist at Capital Economics in London, wrote in a Friday research note that even if China picks up the pace of approvals, global access to Chinese rare earths will likely remain “more restricted than before.”

“Beijing had become more assertive in using export controls as strategic tools, even before the US hiked tariffs this year,” Fahy noted. This means rare earths are likely to remain China’s ace in the deck. 🃏

Even as Beijing wields its rare earth leverage, it’s facing real headwinds at home. New data released Monday shows the Chinese economy is sputtering, with export growth slowing and deflation setting in.

Chinese exports rose just 4.8% year-on-year in May, down from 8.1% in April and well below the 5% expected by economists. Even more concerning, exports to the US—China’s top market—plummeted 34.5% in May, a sharp widening from April’s 21% drop. 📉

Despite these gloomy numbers, Lü Daliang, spokesperson for China’s customs department, insisted that Chinese trade remains “resilient” in the face of global headwinds. But analysts say the domestic slowdown is real—and it could be fueling Beijing’s cautious approach in trade talks.

China’s internal price data is flashing warning signs, too. The Consumer Price Index dipped 0.1% year-on-year in May, while the Producer Price Index—key for measuring factory-gate inflation—dropped 3.3%, the steepest decline in nearly two years.

Dong Lijuan, chief statistician at China’s National Bureau of Statistics, blamed the drop in factory prices on weaker demand for coal, oil, and other raw materials. The high comparison base from last year didn’t help, either. 🏭

Today’s talks in London are more than just another round of trade negotiations—they’re a critical test for the world’s two largest economies. China’s rare earths card gives it powerful leverage, but its domestic economic strains mean it can’t afford to alienate the US entirely.

Will Beijing fully open the rare earths tap? Can Washington and Beijing find common ground on export controls and tech transfers? 🌐

As the London talks continue, expect every development to ripple through global supply chains, tech industries, and markets.