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U.S.-China Trade Truce Collapses: Rare Earths and Tech Power Struggle Escalates

U.S.-China Trade Truce Collapses: Rare Earths and Tech Power Struggle Escalates

Collapse of the US-China Trade Truce and Escalation of the Rare Earth War

Collapse of the Anticipated Tariff Truce

Last month, the United States and China agreed on a 90-day tariff truce to ease the intensifying US-China trade war. Discussions between President Trump and President Xi Jinping led to temporary tariff reductions on both sides.

However, three weeks later, Trump accused China of "completely violating the agreement." In response, China condemned what it sees as discriminatory restrictions by the US. Tensions have once again intensified.

Geopolitical Clash Over Rare Earths

At the heart of the conflict lies the issue of rare earth supply. China accounts for over two-thirds of global rare earth production and more than 90% of processing capacity. The US heavily relies on this, and China's export controls have significantly impacted American industries.

Stable access to rare earths is particularly crucial for defense, clean energy, and high-tech sectors. Delays in China’s export permits have disrupted US companies' production lines and R&D activities.

Tariffs, Yuan, and the Battle for Tech Supremacy

The US is using tariffs as a primary negotiation tool to reduce its trade deficit with China. In retaliation, China has imposed high tariffs on cars, agricultural products, and more. Additionally, disputes over yuan manipulation have created further hurdles, with the US demanding greater currency transparency.

Furthermore, the rivalry is escalating in cutting-edge fields such as AI, semiconductors, and 6G. China is accelerating tech investment through state subsidies, aiming to catch up with the US in technological leadership.

Leaders’ Dialogue Raises Hopes Amid Uncertainty

All eyes are on the upcoming phone call between President Trump and President Xi scheduled for this week. However, it remains unclear whether any concrete agreements will be reached, as both sides continue to blame each other for violations.

Some experts suggest the 90-day truce may be extended, but warn that without real compromise, tensions may flare up again.

Conclusion: Escalation of Trade Friction and the Tech War

The US-China conflict has expanded beyond tariffs to include strategic resources, currency policies, and tech supremacy. Amid this increasingly complex situation, businesses and markets are facing growing uncertainty, with future negotiations and policy developments closely watched.

While the path toward cooperation remains steep, dialogue and compromise are essential for international stability and market confidence.

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David Wilson
Author

David Wilson has extensive experience in currency and commodities trading. He began his career in metal sales and trading at Societe Generale in London. He went on to work as a senior analyst within the FX industry where he developed and refined his own trading and risk management strategies. Having a solid understanding of market dynamics, he founded his own research and asset management services and works with FIXIO to provide timely market commentary on the global financial markets.

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