Pressure ... Pain ... Ouch!
Now that negotiators in Beijing and Washington have identified each other's greatest vulnerabilities, will they do more than just torture each other?
So now we know. After months of bluster and threats, negotiators in Washington and Beijing have identified what really makes the other side squirm.
For all America’s longstanding complaints about industrial subsidies, intellectual property theft, currency manipulation, South China Sea claims, cyber attacks, human rights violations, military build-up, spying and TikTok, what gets America’s attention fastest these days is reliable access to rare earth supplies.
For all China’s persistent denunciations of U.S. unilateralism, dollar sanctions, domestic meddling, arms sales to Taiwan, “Cold War mentality,” military build-up, spying and TikTok, what gets Beijing’s attention these days is reliable access to Western technology.
As of this writing, we still don’t know the details of what was agreed in London over the past few days, and that may be because few details were actually agreed upon. What seems obvious, however, is that each side seems to have found the geopolitical equivalent of the solar plexus, that one sensitive area that really hurts when thwacked.
Ultimately, for all the hoopla, bluster and righteous indignation on both sides, what really counts is terbium for the Americans and tech for the Chinese.
The U.S. negotiating team seems to have also agreed to relax any threatened restrictions on Chinese student visas, while China has apparently promised even more (no, really this time!) efforts to crack down on the export of chemicals that make fentanyl. But the deal is essentially an agreement to resume those elements in the supply chain that matter most to both economies.
President Trump has spun the outcome with all the ebullience that capital letters will allow:
But if Trump tried to make it seem that he had secured America’s magnets in return for a student exchange program, China also insisted on Washington reopening exports of key technologies it considers vital. The specifics remain unclear, but at the very least, this probably includes jet engines, ethane and microchips essential to Chinese manufacturing. It may also include some chip design software.
These are notable concessions because they seem to deal away technologies that many China hawks in Washington insist go directly to accelerating China’s rapid military buildup, thus posing a potential threat to U.S. national security. The administration insists it will retain control over the most advanced chips that power the latest artificial intelligence programs.
But it’s hard to believe there’s a clear understanding on exactly where the U.S. will draw the line on permissible technologies or on how reliable Chinese supplies of rare earths will be. Already yesterday, Beijing announced it would only be issuing 6-month licenses, suggesting it was ready to play this card again.
If there were any doubt about the details that remain to be filled in, Commerce Secretary Howard Lutnick described what had been achieved in two long days of negotiations as a “handshake for a framework.” With 55% tariffs still in place on Chinese exports and 60 days left on a 90-day suspension of even higher levels, the talks will need to accelerate dramatically if they are to offer any long-term stability to the world’s largest bilateral economic relationship.
Later, Lutnick explained that what forced the agreement in London was that both sides had reached “mutual assured annoyance." But it was much more than that. Both sides had found a key pressure point that would force the other to cave.
The question now is whether they will use this knowledge as leverage that will lead to progress, or whether it will be more politically expedient excuse to torture each other.