Background on Key Figures and Relevance
The Chinese government, specifically the Ministry of Commerce and General Administration of Customs, has temporarily lifted export restrictions on rare earth elements and related technologies, as well as heavy rare earths and lithium-ion batteries. This move comes after US President Donald Trump threatened “massive tariffs” on China due to these restrictions announced earlier in October. The leaders of both countries managed to bridge their positions during a recent meeting.
Rare earth elements are crucial for various high-tech industries, including electronics, electric vehicles, and renewable energy technologies. China dominates the global rare earth market, controlling over 90% of current production capacity. This strategic control has led to concerns about supply chain vulnerabilities for countries relying on these materials, such as the United States.
Key Actions and Timeline
- October 9, 2020: The Chinese Ministry of Commerce and General Administration of Customs announce export restrictions on rare earth elements, related technologies, heavy rare earths, and lithium-ion batteries.
- October 2020: US President Donald Trump threatens “massive tariffs” on China in response to the export restrictions.
- Recent Meeting: Leaders of China and the US reach an agreement to ease tensions.
- October 26, 2020: China announces a one-year suspension of the export restrictions, effective immediately until November 10, 2026.
- Early November 2020: China also decides to pause for one year the additional tariff of 24% on US imports and cease additional tariff measures imposed in March that increased import duties by 15% on US chicken, wheat, corn, and cotton.
Suspended Export Controls
The suspended export controls include:
- Certain rare earth export equipment and raw materials
- Rare earth technology items
- Foreign rare earth-related significant items
- Heavy rare earth materials and lithium-ion battery components
Rationale and Impact
According to the Chinese Ministry of Finance, suspending certain bilateral tariffs between China and the US serves both countries’ fundamental interests, meets international expectations, and elevates their economic and trade relations.
Additionally, China’s Ministry of Commerce announced it would suspend measures against 15 US entities included in March on the “untrustworthy entities” list starting November 10. Meanwhile, China decided to extend for one year the suspension of measures against 16 US entities added in April.
Context and Agreement
These announcements by China aim to improve trade relations between the two powers. Last week, Trump announced an agreement with Chinese President Xi Jinping to reduce retaliatory tariffs imposed on China from 20% to 10% immediately. In the negotiations, China committed to purchasing large quantities of US soybeans and ensuring no further restrictions on rare earths.
Key Questions and Answers
- What are rare earth elements? Rare earth elements are a set of seventeen chemical elements, comprising fifteen lanthanides and scandium and yttrium. They are crucial for various high-tech industries, including electronics, electric vehicles, and renewable energy technologies.
- Why is China’s control over rare earths significant? China dominates the global rare earth market, controlling more than 90% of current production capacity. This strategic control has raised concerns about supply chain vulnerabilities for countries relying on these materials, such as the United States.
- What was the agreement between Trump and Xi Jinping? The US reduced retaliatory tariffs imposed on China from 20% to 10% immediately. In return, China committed to purchasing large quantities of US soybeans and ensuring no further restrictions on rare earths.
