Switch off the editor’s digest free of charge
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
China’s success in growling global supply chains by picking up the flow of rare earths has made the pressure on Washington and to cope with the power of Beijing, export controls to a broader spectrum of critical goods, analysts and business people.
China dominates the supply chain for important minerals, and its Ministry of Commerce began at the beginning of April licenses for exports from rare earths and relatives magnets. The slow approval process has shaken global supply chains and recorded Beijing lever against the United States after Donald Trump’s “liberation day” tariffs.
There are now hopes that more licenses will be issued after Trump and China’s President Xi Jinping spoke on Thursday, and paved the way for a new round of Commercial talks in London on Monday. On Saturday, Beijing signaled faster Approval process for some European companies.
However, the recent use of export controls by XI has withdrawn the balance of power in the US China trade talks in Beijing, said experts.
Andrew GilholmHead of China Analysis in consulting control risks, said that export controls are to push the government of XI not only against the United States, but also against the third countries of Washington, to take a harder line in China.
“The simple truth is that we don’t have much precedent for this. The export controls are a dream tool for Beijing. You can optimize, tighten yourself, relax, apply to all countries or to a country,” said Gilholm.
China’s Ministry of Foreign Affairs confirmed Vice Prime Minister on Saturday He lifeg will travel to Great Britain for talks this week. Trump sent finance minister Scott betsCommercial secretary Howard Lutnick and US trade representative Jamieson Greer For the first round of negotiations since the 90-day trading arms arrest was hit on May 12th.
The danger for the USA and the EU bodies are caught in commercial wars with China in the fact that the leverage effect that Beijing has discovered with rare earth export controls can also be replicated in other areas of the high-tech supply chain, according to analysts.
When Beijing wanted to react to future escalations, such as
China also dominates the production of new ultra powerful magnets, more powerful transistors, denser and cheaper batteries as well as new chips and software. Arthur Croser said to customers in a note. He also quoted “an impressive ecosystem overlapping industries” about electrical and autonomous vehicles, drones, robots, sensors, smartphones and the semiconductor, batteries and AI that supply them with electricity “.
“The balance between the lever quickly shifts in favor of China, a fact that the Trump team hardly began to recognize,” he added.
According to a Flash survey by the American Chamber of Commerce in China in China, a lobby group had more than three quarters of companies affected by the controls of the rare earths at the end of May for only three months, which highlighted, how closely many factories were down.
In the past few days, the European Chamber said that the number of exporters had increased, who were classified as “avoiding a larger crisis” as the most urgent. However, the blocks of the block fought both in terms of delays and in terms of transparency with the license process.
It is unclear whether Beijing had intended to target Europe, but as soon as the bottlenecks became clear, it could have been extinguished, said a business person.
The slow approval of export licenses has already led to a number of urgent bilateral negotiations in Beijing, which gives China a greater leverage in other conflict areas. In the past few weeks, rare earths have been applied directly in Beijing from South Korea, Japan and some EU member states, according to the persons familiar with the matter.
China’s approach is “purely transactional”, said a western diplomat that is familiar with the negotiations and added: “You want to share and conquer”.
Beijing has argued that the use of export controls in international practice corresponds to products that can be used in both military and civilian applications. The United States has also imposed restrictions on the sale of semiconductors and chip plaque devices in China, which are aimed at the country’s technological increase.
The Ministry of Commerce did not immediately answer questions on Saturday.
The risk of cutting off rare earths and magnets from Chinese made made increases the determination of reducing the dependency on the industrial supply chain of China.
Ilaria MazzoccoAn expert in industrial policy in the Center for Strategic and International Studies, a Think tank in Washington, expects governments to build larger resources in order to withstand such shocks and make more funds available to develop alternatives.
Tom Nunlist, Associate Director of Shanghai at Trivium, said that the current export controls have proven to be “extremely effective” and could last because the countries do not simply “open open mines and set up the refinement operation overnight”.
“China first has to find out how he can practice the already designated fire force more precisely.”
