This week’s talks in London between the U.S. and China, which concluded with a “framework agreement” for future negotiations, have highlighted a shift in the economic battle lines initiated by the Trump administration. While the trade war was initially driven by the trade imbalance between the world’s two largest economies, the focus has increasingly shifted to the control of global supply chains.
The London negotiations were convened after the tariff truce agreed upon in last month’s Geneva talks effectively fell apart. Discussions centered on China lifting export controls on rare earth minerals to the U.S. China tightened its restrictions in response to U.S. bans on jet engine components and the exclusion of Chinese students from American universities following the Geneva talks.
China entered the negotiations from a position widely recognized as stronger, as its restrictions on rare earths—used in the production of high-temperature magnets—threatened to paralyze key sectors of the automotive industry. Automakers and parts manufacturers met with Trump and informed him that they faced shutdowns unless supplies were restored.
While details of the London agreement have not been released—some reports indicate they are still being finalized—the general outline has been disclosed. Under the agreement, China will ease its restrictions on rare earth exports in exchange for the U.S. lifting some restrictions on the sale of jet engines and related parts, as well as ethane needed for plastic manufacturing.
However, China did not secure relief from export restrictions on advanced semiconductors, despite the possibility being raised by Trump’s top economic official, Kevin Hassett, before the London talks began. Although China pressed this demand, it did not make it a deal-breaker and seemed willing to wait, apparently for two reasons.
First, while high-level tech bans have had an impact, Chinese companies have been able to develop workarounds. The most prominent example was DeepSeek’s development in January of an AI platform on par with U.S. offerings at a much lower cost, despite limited access to advanced AI chips developed by U.S. firm Nvidia.
Second, China imposed a six-month limit on the easing of its export controls on rare earths and magnets, over which it has near-total control, indicating it is willing to use this leverage again if necessary.
Trump, as is his custom, proclaimed victory, declaring on social media that, subject to his final approval and that of Chinese President Xi Jinping, China would “immediately” supply the full magnets and any necessary rare earths.
Trump’s claims have been questioned by his critics in the U.S., particularly in the pages of the Wall Street Journal (WSJ).
An article titled “China’s Control Over Rare Earths Dictated the Path to Trade Truce” noted: “China’s dominance over supplies of essential minerals for high-tech goods, from electric vehicles to fighter jets, has become a formidable advantage in trade negotiations with the U.S.”
An editorial in the WSJ downplayed Trump’s supposed victory: “President Trump… hailed the outcome of the latest trade talks with China as a great victory, but the best we can say is that it’s a truce that favors China.”
Along with all sectors of the political, military, intelligence, and corporate media apparatus, the Murdoch-owned WSJ considers suppressing China’s economic development an existential issue for maintaining U.S. global dominance. Its difference with Trump lies in how to achieve that goal.
The issue of rare earths, the WSJ said, points to a “larger problem with Trump’s tariff strategy: that he doesn’t have one. His latest retreat shows he can’t intimidate China as he tried in his first term. China has its own leverage.”
The editorial called for a “smarter strategy” in which the U.S. works with its allies against China, rather than the “aimless” approach Trump has used in imposing tariffs on both “friends and foes.”
But to consider Trump’s measures as some kind of mistake is a misinterpretation of the situation facing the U.S.
Countries that have been targeted by reciprocal tariffs, especially those in Southeast Asia, have close economic ties with China. While they depend on the U.S. as an export market, they also rely on China and are part of a global supply chain, so they have tried to balance between the two.
However, with the deindustrialization of its economy and the consolidation of Wall Street’s financial parasitism as a central component of profit accumulation, the U.S. has no viable economic alternative to offer, so its attempts at pressure fail to achieve the desired outcome.
Hence the use of dictates in the form of tariff increases. At the center of negotiations with dozens of countries that have faced tariff retaliation is the U.S. demand that they abandon neutrality and align economically, politically, and—if necessary—militarily with the U.S. against China, or face harsh punishment with exclusion from the U.S. market.
Meanwhile, Trump officials claim there is a peaceful resolution to the conflict while intensifying military preparations.
Returning from the London talks to testify before the U.S. Senate, Treasury Secretary Scott Bessent declared: “If China corrects course by fulfilling its part of the initial trade deal we outlined in Geneva last month, then a great and beautiful rebalancing between the world’s two largest economies is possible.”
Bessent is either deluding himself or trying to deceive others. The U.S. demand for “rebalancing” goes far beyond reducing China’s trade surplus. It is nothing less than the subordination of China’s economic expansion to Washington’s demands.
But in many ways, the horse has already left the barn. As the WSJ noted, China already has the “advantage” in many essential sectors of the modern economy.
“The world’s second-largest economy accounts for about a third of global manufacturing output, giving it a potential stranglehold on auto parts, basic drug ingredients, key components of the electronics supply chain, and many other industrial areas.”
By contrast, the U.S., the newspaper continued, dominates few sectors, “though its power in advanced technology gives it a disproportionate advantage.”
But even that advantage is being eroded. This means the conflict has far exceeded the issue of trade deficits and surpluses. As the WSJ put it, a new “era of weaponized supply chains” has arrived, and the shift “highlights how the U.S.-China rivalry is increasingly about who controls the levers of global economic power.”
The inexorable logic of this process is that, in the face of Washington’s relative failure to use its economic power to subordinate China, it will increasingly resort to military means. The lesson to be drawn from the outcome of the London talks and the so-called framework agreement is that the war has taken a big step forward.
— new from World Socialist Web Site