The meeting between Xi Jinping, the President of China, and Donald Trump, the President of the United States, will be held on Thursday in Washington. UBS analysts, quoting Yuy Sun, a senior economist in China, stated that this meeting primarily relates to strategic issues, mild tariff advancements, rare materials, and artificial intelligence safety.
Decline in Rare Material Exports from China
Political risk analyst, Markus Bischof, does not expect major advancements from this meeting and says that the more likely outcome will be the continuation of U.S.-China relations. He also points to cautionary signs for increasing expectations following negotiations between Scott Basset, the U.S. Treasury Secretary, and Li Heifeng, the Vice Premier of China.
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Recent reports indicate that Basset and Li Heifeng are set to discuss advanced artificial intelligence robots and the global adoption of this technology, as well as rare materials. According to Christian Keller, Head of Economic Research at Barclays, China's near-total control over more than 95% of critical material processing has been used as leverage against the United States.
Consequences of Export Decline
Recently released customs data shows that exports of rare materials from China to the United States sharply declined in August, reaching 512 tons, which represents a 21% decrease compared to July. This decline has made securing materials needed for manufacturing parts in vehicles, consumer goods, and weapons one of the key issues in negotiations.
Chris Kennedy from Barclays states, "Washington needs stability with Beijing to maintain the flow of these critical inputs." He also notes that periods of calm that lead to access to cheaper Chinese materials weaken the urgency for the United States to reduce dependence on China. This data indicates that China's near-monopoly control over critical materials could be used as a geopolitical lever.
A major problem for the United States is that Barclays has predicted that China will maintain control over mineral extraction and global processing of these materials at least until 2030. Breaking this near-monopoly control by China is currently a prominent issue, which includes finding conflict-free supply chain-producing mines that can supply the West.
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