(Zero Hedge)—Chinese President Xi Jinping and President Donald Trump are scheduled to meet in Washington on Thursday. UBS analysts quoted chief China economist Yu Song as saying the meeting between the leaders of the two global superpowers is largely about strategic stability and modest progress on tariffs, rare earths, and AI safety.
Political risk analyst Marcus Bischoff expects no major breakthrough but says the most realistic outcome is continuity in US-China relations as the most likely outcome. He sees cautious grounds for higher expectations following discussions between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng ahead of the Trump-Xi summit.
Over the weekend, a Reuters report said that Bessent and Chinese Vice Premier He Lifeng were set to discuss advanced AI bots and the global adoption of the technology, as well as rare earths.
As Christian Keller, Barclays’ global head of economics research, recently described, China’s near-total control of more than 95% of critical material refining has been used as leverage against the US. Whether magnets, tungsten, germanium, gallium, or other critical materials, China has restricted their flows over the last year and a half, forcing the US into a mad sprint to secure conflict-free supplies.
Bloomberg reported the latest details on China’s resource nationalism and the weaponization of critical material supply chains overnight, citing customs data released Sunday that showed rare earth shipments from China to the US plunged sharply in August.
Shipments dropped 21% from July to 512 tons, according to the new trade data. The decline leaves US supplies of components used in cars, consumer goods, and weapons as a key talking point, whether in discussions between Bessent and his Chinese counterparts or between Trump and Xi.
Bloomberg Economics’ Chris Kennedy said, “Washington needs stability with Beijing to keep these critical inputs moving,” adding, “Yet periods of calm that restore access to lower-cost Chinese material weaken the urgency for the US to break its dependence on China.”
The latest trade data shows China’s quasi-monopolistic control of critical materials can be used as geopolitical leverage.
One major problem for the US is that Barclays’ Keller shows Beijing will control mineral mining and global refining of these materials through at least 2030.
Breaking Beijing’s quasi-monopolistic grip has been an emerging theme of ours that includes finding producing miners with conflict-free supply chains that can deliver to the West. Those miners will be the early winners because these critical materials are the building blocks of the West’s pursuit of reindustrialization, the AI data center buildout, power grid upgrades, and, of course, the incoming rearmament cycle.
