China always has an ace up its sleeve

Geneva first, and London this week, have been the scene of tense trade negotiations between the United States and China. After two days of marathon sessions in the British capital, the delegations of the two great powers appear to have saved us all from a massive conflict with global repercussions. It seems. Not much has been revealed about the content of the agreements reached, beyond the now traditional all-caps messages from US President Trump. He says he's happy. Chinese President Xi Jinping, also traditionally, hasn't commented.

If one thing is clear, it's that the astronomical tariffs imposed by both sides on bilateral trade are being withdrawn. We're back to square one, back to where we started a few months ago, when President Trump announced a dramatic increase in tariffs on Chinese imports in early April. Escalating and then de-escalating is the American president's strategy. A circular negotiation that ends with a return to more or less the same place. However, along the way, distrust in our American friend and global economic uncertainty have soared, putting global economic growth at risk.

Trump has brought to global economic policy a way of working that has probably worked for him in the business world. He uses the United States' vast economic power to make massive threats and force the other side to accept his terms. Many countries will have no choice but to give in, but that's not the case with China. The Asian giant has an ace up its sleeve: rare earths, on which much of US industry depends.

Agreement in London We're back to square one in the US-China trade negotiations, at a cost that calls into question Trump's strategy.

Aside from the rollback of tariffs, little has emerged from the framework agreement reached in London. China is expected to ease restrictions on mineral exports, which threatened to paralyze various US production sectors. In return, the US will relax limits on its technology exports and withdraw its threats to cancel visas for Chinese students at American universities. No further progress has been made, except that the remaining trade issues will be addressed in future negotiations.

The outcome raises questions about what exactly President Trump's aggressive trade tactics against China have achieved, and whether a plan had actually been drawn up in this regard. The White House believes they are winning, that Beijing has been forced to concede on rare earths. And it highlights the strength of the US economy and the relative containment of prices as evidence that the trade war with China has inflicted little damage. The World Bank disagrees, lowering its growth forecast for the United States this week to 1.4% this year, down from 2.8% in 2024, and warning that trade tensions are paving the way for the slowest-growing decade since the 1960s. That 1.4% is almost a percentage point below the January estimate, making the US the country hardest hit by the trade war.

Significantly, the statements from both sides differed considerably following the London negotiations. For US Secretary of Commerce Howard Lutnick, the main objective was to reduce the deficit with China, but first, "we had to get rid of all the negativity; now we can move toward positive, growing trade that benefits both China and the United States." For Liu Pengyu, spokesperson for the Chinese embassy in Washington, "there are no winners or losers in a trade war; China is not seeking conflict, but it will not be intimidated."

Rare earths The US seems to have made a mistake in its bet: its industry desperately needs Chinese minerals.

The question is whether the US made the wrong bet, whether it played too hard this time. The country desperately needs the rare earths that China produces. The restrictions imposed by Beijing on these exports forced automakers and other industries to pressure the White House to end the problem by any means necessary, and even the US military industry, which also needs these minerals, suffered.

The American strategy was most likely based on the theory that China would be forced to concede quickly given its dependence on exports. The experience of recent months is the opposite: China has been able to withstand the punishment and could probably hold out longer than the United States. And you can always bring out the rare earth ace.