US Treasury Secretary Scott Bessent recently expressed that China made a significant error in threatening to cut off exports of rare earth materials. He believes the US can find alternative sources within two years. This comes after a meeting between Donald Trump and Xi Jinping in South Korea, where Bessent noted that the two leaders found a temporary balance, although he cautioned that China should not use its mineral resources as leverage.
Bessent emphasized that China’s control over the rare earth market won’t last long, likely only 12 to 24 months. The US is prepared to handle these challenges, especially since China has alerted the world to its reliance on these resources. In his words, “It’s one thing to put the gun on the table. It’s another thing to fire shots in the air.”
The backdrop of this discussion is a recent summit that followed a period of heightened trade tensions, where both countries imposed significant tariffs. Although a truce was reached, China’s actions regarding rare earths reignited global unease, impacting industries worldwide.
Bessent observed that Chinese leaders were aware of the backlash from their export restrictions. He recently talked with Chinese Vice-Premier He Lifeng, helping to preserve the trade deal and maintain communication between the countries. He noted that both leaders respected each other during their meeting and recognized the importance of stability for their economies and the global market.
Interestingly, a light moment emerged when Trump suggested visiting Beijing in winter, only for Xi to push for a spring visit due to the cold weather in January and February.
As part of a one-year agreement, China agreed to delay its rare earths policy, purchase large quantities of US soybeans, and allow American investors control of TikTok in the US. In return, the US paused a measure that would blacklist numerous Chinese entities and reduced tariffs on fentanyl-related products. Bessent highlighted the importance of the fentanyl discussion, emphasizing its significance to the US administration and the broader public.
Some experts indicate that while the US and China may have paused hostilities, meaningful changes in their relationship remain uncertain. Yet Bessent disagrees, arguing the US can still encourage China to reform certain economic practices.
China’s exports are facing challenges as tariffs push their products toward Europe and other regions. Bessent pointed out that the US trade deficit with China has decreased by 25% this year, while China’s manufacturing has been in decline for several months.
The US holds a strong position globally, thanks to its military strength, economic power, and innovation leadership. Bessent is optimistic about upcoming negotiations and believes that, despite potential bumps in the road, effective communication channels are now better established.
In this complex landscape, it’s essential for both nations to navigate their economic relationship carefully, not only for their own benefit but also for global stability.
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