US, Chinese officials face off on export controls, Trump tariff threat in Malaysia
Written by: Rozanna Latiff and David Lawder
KUALA LUMPUR/WASHINGTON (Reuters) – Top economic officials from the United States and China will arrive in Kuala Lumpur on Friday for talks aimed at preventing an escalation of the trade war and keeping next week’s meeting between U.S. President Donald Trump and Chinese President Xi Jinping on track.
U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer will meet with Chinese Vice Premier He Lifeng to find a path forward after Trump threatened new 100% tariffs and other trade restrictions on Chinese goods starting Nov. 1 in retaliation for greatly expanded export controls on China’s rare earth magnets and minerals.
The talks, which will begin on the sidelines of the Association of Southeast Asian Nations Summit in the Malaysian capital on Saturday, are the fifth meeting between He, Bessent and Greer since May, marking the transition from European cities to a major Asian exporter dependent on both China and the United States.
RARE EARTH DROPPING
The talks again focus on China’s pressure on the global supply of rare earth minerals and magnets, which are necessary for high-tech production and which Beijing uses as an effective trump card against Washington.
In April, Trump hit Chinese imports with new tariffs on both sides that quickly rose to triple-digit rates, and Beijing cut off supplies of rare earths to U.S. buyers; This threatened to halt U.S. production of electric vehicles, semiconductors, and weapons systems.
Bessent and Greer’s first meeting with He in Geneva in May led to a 90-day ceasefire; This sharply reduced tariffs to about 55% on the US side and 10% on the Chinese side, restarting the flow of magnets. Terms were revised in London and Stockholm, and talks in Madrid in September resulted in an agreement to transfer Chinese short video app TikTok to US ownership control.
But the fragile truce frayed two weeks later when the U.S. Department of Commerce vastly expanded its U.S. export blacklist, automatically including firms more than 50% owned by companies already on the list, banning the U.S. from exporting to thousands more Chinese firms.
China responded with new global rare earth export controls on October 10, seeking export licenses for products that use Chinese rare earths or rare earth refining, extraction or processing technology developed by Chinese firms, aiming to prevent their use in military systems.
Bessent and Greer called China’s move a “power grab in the global supply chain” and vowed that the United States and its allies would not accept restrictions. Reuters reports that the Trump administration is considering a plan to up the ante by imposing restrictions on a dizzying array of software-supported exports to China, from laptops to jet engines, according to sources familiar with the negotiations.
STEP BACK FROM THE SHORE
But analysts say the challenges in Kuala Lumpur are negotiating a return to the status quo ante to keep the magnets flowing and avoid a major U.S. tariff increase. If they fail, the Trump-Xi meeting during the Asia Pacific Economic Cooperation Summit in South Korea next Thursday could be cancelled.
“As a result, I am optimistic that tactical decisions will be made at this particular meeting to extend the pause,” said Dennis Wilder, a senior fellow at Georgetown University’s Initiative for U.S.-China Dialogue on Global Issues.
“Trump will not go for 100% tariffs. The Chinese will move away from the idea that rare earth exports to defense sectors around the world will not happen,” Wilder said in a speech at an online forum hosted by the Center for Strategic and International Studies. he said.
After China did not buy any soybeans in September, the US side is also likely to pressure Beijing to continue buying American soybeans.
But the talks are unlikely to examine key U.S. complaints about China’s export-led economic model that triggered Trump’s tariffs in the first place, including rebalancing the Chinese economy toward greater consumption and reducing excess manufacturing capacity.
“We can’t achieve that because we have to ask them to buy soybeans, right?” said Philip Luck, Director of the Economics Program at the Center for Strategic and International Studies. “That’s not the point.”
(Reporting by David Lawder and Rozanna Latiff)
