At the heart of the issue? Rare earth magnets used in advanced U.S. military hardware — like fighter jets and missile guidance systems. Despite progress in other areas, Beijing has refused to grant export clearance for certain specialized rare earth elements essential to U.S. defense contractors, according to insiders briefed on the talks.

Meanwhile, Washington continues to restrict exports of advanced AI chips to China, citing national security concerns. These chips power not only cutting-edge consumer tech, but also next-generation weapons and surveillance systems.

🎯 A Trade-Off That Wasn’t

During the London discussions, Chinese officials hinted at a possible trade-off: they might consider loosening restrictions on military-use rare earths if the U.S. dialed back its AI chip export controls. But the Trump administration isn’t biting.

🗣️ “There will be no quid pro quo,” said Treasury Secretary Scott Bessent.

The talks, which started with discussions on opioids, tariffs, and China’s trade surplus, have now zeroed in on export controls — and that’s where both sides appear unwilling to budge.

🧱 Beijing’s Rare Earth Leverage

Rare earths may sound obscure, but they’re vital. China holds:

  • ~70% of global rare earths production

  • ~90% of the world’s refining capacity

This gives Beijing tremendous leverage, especially as the U.S. scrambles to build its own domestic supply chain.

Some progress was made for non-military applications: China agreed to fast-track approvals for tens of thousands of pending rare earth export licenses to American companies — but only those in non-military industries.

Beijing also floated the idea of a "green channel" to expedite licenses for “trusted” U.S. firms. That move helped JL MAG Rare-Earth, a Chinese producer, obtain licenses to export to the U.S. this week.

But critical magnets like samarium cobalt — used in defense systems — remain blocked. These aren’t included in China’s fast-track list.

⏳ A Countdown to August 10

The London talks came on the heels of a Trump-Xi call and followed the Geneva agreement last month that temporarily slashed tariffs. Trump now wants to extend U.S. tariffs another 90 days beyond the current August 10 expiration, suggesting no permanent deal is in sight.

📈 Trump has declared tariffs will stay at 55% on Chinese goods, while China will hold at 10% on U.S. exports.

The president also hinted at using Section 301 trade law to legally justify the tariffs if his administration loses an ongoing court battle.

Some analysts believe the deadline extension is more about political maneuvering than real progress. With an election looming, Trump may be positioning himself to maintain pressure on Beijing even if he’s pushed out of office or loses the legal basis for his tariffs.

🧠 Experts Say: Don't Expect a Breakthrough

📉 “Temporary mutual accommodation is possible, but the fundamental trade imbalance can’t be resolved this fast,” said Liu Weidong of the Chinese Academy of Social Sciences.

And Ryan Hass of the Brookings Institution adds: “It has taken the Trump team a few punches in the nose to recognize they won't get another trade agreement that solely addresses Trump’s priorities.”

🔑 Key Takeaways:

  • No progress on military-use rare earth exports from China

  • China links this to U.S. AI chip restrictions

  • Some movement on non-military exports with fast-track licenses

  • Trump seeking tariff extension past August 10

  • Rare earths remain a major geopolitical choke point

⚠️ Until this minerals deadlock is resolved, any talk of a lasting trade peace between the world’s top two economies remains just that — talk.

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