Economy

China Trade War Escalates: Can U.S. and China Officials Avert New Tariffs on Rare Earths?

U.S. and China officials meet to avoid trade war escalation over rare earths, and avert tariffs.

October 24, 2025, 9:14 AM

High-angle drone view of a massive walking excavator digging in an open-pit mine of striated red, orange, and brown earth

This industrial drone view captures a massive walking excavator working in an open-pit quarry, excavating brightly colored earth for the extraction of rare metals. By mykhailo pavlenko / Shutterstock.com.

Executive Summary

U.S. and Chinese economic officials are meeting in Kuala Lumpur to avert a major trade war escalation and ensure a planned summit between President Trump and Chinese President Xi Jinping.

The primary focus of the discussions is China’s expanded export controls on rare earth minerals and magnets, which prompted President Trump to threaten new 100% tariffs on Chinese goods.

Failure of these talks could lead to the cancellation of the Trump-Xi meeting and a significant tariff hike, with the U.S. also pressing China to resume purchases of American soybeans.

The Story So Far

The current high-level talks between the U.S. and China are a direct response to escalating trade tensions, which saw a previous 90-day truce fray despite earlier agreements. This renewed urgency stems from China’s recent expansion of export controls on rare earth minerals and magnets, vital for high-tech industries, a move the U.S. views as a “global supply chain power grab.” In retaliation, President Trump has threatened new 100% tariffs on Chinese goods, making these discussions critical to avert a significant trade war escalation and preserve a planned meeting between President Trump and Chinese President Xi Jinping.

Why This Matters

These critical talks between the U.S. and China are pivotal for averting a significant trade war escalation, as a failure could trigger President Trump’s threatened 100% tariffs and further Chinese rare earth export controls, severely disrupting global supply chains for high-tech industries like electric vehicles and semiconductors. The outcome also carries diplomatic weight, directly influencing the planned meeting between President Trump and Chinese President Xi Jinping, while addressing U.S. agricultural concerns vital to Trump’s political constituency.

Who Thinks What?

U.S. officials, including Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer, criticize China’s expanded rare earth export controls as a “global supply chain power grab,” threatening new 100% tariffs on Chinese goods in retaliation, and are pressing Beijing to resume purchases of American soybeans.

Chinese officials state their expanded rare earth export controls are aimed at preventing their use in military systems and are engaging in high-level talks with the U.S. to avert a significant trade war escalation.

Analysts suggest the primary challenge for U.S. and Chinese officials is to negotiate a return to the prior status quo, ensuring the continued flow of magnets and averting a massive U.S. tariff hike, with optimism for a tactical extension of the pause.

Top economic officials from the United States and China are convening in Kuala Lumpur this week for critical talks aimed at averting a significant trade war escalation and ensuring a planned meeting between President Donald Trump and Chinese President Xi Jinping proceeds next week. The discussions, which began with arrivals on Friday and formal talks commencing Saturday on the sidelines of the Association of Southeast Asian Nations Summit, are primarily focused on China’s recently expanded export controls on rare earth minerals and magnets, a move that prompted President Trump to threaten new 100% tariffs on Chinese goods.

High-Level Engagement

U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer are meeting with Chinese Vice Premier He Lifeng. This marks their fifth engagement since May, with previous rounds held in various European cities.

The immediate catalyst for these renewed discussions is President Trump’s threat of new 100% tariffs on Chinese goods and other trade curbs, set to begin November 1. This comes in retaliation for China’s vastly expanded export controls on rare earth magnets and minerals.

Rare Earths at the Core

China’s new rare earth export controls, implemented on October 10, require export licenses for products utilizing Chinese rare earths or related refining and processing technology. Beijing has stated the aim is to prevent their use in military systems.

These controls underscore China’s significant leverage as a dominant global supplier of rare earth minerals, which are essential for high-tech manufacturing. U.S. officials, including Bessent and Greer, have criticized China’s move as a “global supply chain power grab.”

Earlier this year, U.S. tariffs in April escalated to triple-digit rates, leading Beijing to cut off rare earth supplies to U.S. buyers. This action threatened to halt U.S. production in sectors like electric vehicles, semiconductors, and weapons systems.

The Fraying Truce

A 90-day truce was established in May after initial talks in Geneva, which significantly lowered tariffs and restarted the flow of magnets. Subsequent meetings in London and Stockholm further refined the terms of this agreement.

September talks in Madrid also yielded a deal to transfer Chinese short video app TikTok to U.S. ownership control. However, the delicate truce frayed two weeks later when the U.S. Commerce Department expanded its export blacklist, banning U.S. exports to thousands more Chinese firms.

The Trump administration is reportedly considering additional measures, including curbs on a wide array of software-powered exports to China, ranging from laptops to jet engines, according to sources familiar with the deliberations.

Outlook and Remaining Challenges

Analysts suggest the primary challenge for U.S. and Chinese officials in Kuala Lumpur is to negotiate a return to the prior status quo, ensuring the continued flow of magnets and averting a massive U.S. tariff hike. Failure could lead to the cancellation of next week’s Trump-Xi meeting in South Korea during the Asia Pacific Economic Cooperation Summit.

Dennis Wilder, a senior fellow at Georgetown University’s Initiative for U.S.-China Dialogue on Global Issues, expressed optimism for a tactical extension of the pause. He anticipates that President Trump may avoid the 100% tariffs and China might partially ease its rare earth export restrictions.

The U.S. side is also expected to press Beijing to resume purchases of American soybeans, a key concern for President Trump’s political constituency. China’s cessation of soybean purchases in September has created economic difficulties for U.S. farmers.

However, the talks are less likely to address core U.S. complaints about China’s export-driven economic model, such as the need for greater domestic consumption and reduced excess production capacity. Philip Luck, director of the Center for Strategic and International Studies’ Economics Program, noted that immediate concerns often overshadow these deeper structural issues.