Export Controls Now on the Table in China Trade Talks
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Trade talks between the U.S. and China this week cemented a seismic change in Washington’s approach to the countries’ economic relationship: U.S. export curbs, meant to keep sensitive technologies out of Beijing’s hands, are now explicitly up for negotiation.
At the heart of the policy shift is China’s stranglehold over rare earths and its decision to restrict supply to American manufacturers reliant on the key inputs.
That dependency set off a scramble in Washington to try to gain leverage over the world’s second-largest economy — and ultimately led the U.S. to link export controls and trade talks, a longstanding ask by Beijing.
After the Trump team spent weeks accusing Beijing of failing to fulfill promises it made a month ago in Geneva, U.S. officials started to impose export restrictions on goods like semiconductor design software, jet engine parts, chemicals and nuclear materials to get China back to the table. The U.S. also began revoking visas for Chinese students.
Yet none of those actions seemed intended to stick or be defended on their traditional grounds — national security. Instead, the curbs are now being used to pressure China into approving export licenses for rare-earth elements.
While U.S. Trade Representative Jamieson Greer said the talks in London were focused entirely on “getting to full compliance” of the pact sealed in Geneva — where export controls were not on the table — another top administration official said the US used such curbs to get China to do what it had already promised in Switzerland.
“We needed to make sure that when they pulled out their card of these rare earth magnets, we put in ours that said, ‘Look, you just can’t do that to America. America is too great, too strong,’ ” Commerce Secretary Howard Lutnick said June 11 on CNBC. “So if you want to annoy us, the United States of America under Donald Trump is strong enough to annoy you back equally.”
If China complies and approves all critical minerals licenses for U.S. firms, at least some of the recent restrictions will be lifted, people familiar with the plans said. But if Beijing doesn’t live up to the deal, the Trump administration may do more than just leave its latest measures in place. The U.S. is prepared to ramp up controls on goods like jet engine parts, or further target Chinese companies like Huawei Technologies Co., in order to secure rare earth flows, the people added.
Student Visas
It’s still not clear exactly what terms the two sides agreed on this week, but President Donald Trump said in a social media post June 11: “FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UP FRONT, BY CHINA. LIKEWISE, WE WILL PROVIDE TO CHINA WHAT WAS AGREED TO.” He cited student visas but did not elaborate on U.S. export controls that would be lifted.
The Commerce Department imposed curbs on a wide range of sectors in the weeks following the Geneva meeting, in some cases without informing officials at other agencies that are typically involved in the process, people familiar with the matter said.
While the scope of the measures to be rolled back is limited to those from the past month, the move risks exposing the U.S. to further demands by Beijing to lift earlier rounds of export controls. The action also will complicate measures the Trump administration intended to take against China in the future.
The U.S. has been sharpening its arsenal, which includes possible sanctions on Chinese tech giants that have been under consideration for months, as well as a more recently drafted rule to target subsidiaries of sanctioned firms — a policy that could result in significant additions to the Commerce Department’s so-called entity list. Even before the London meetings, there was debate on how to time those measures to avoid disrupting trade talks, people familiar with the matter said.
Treasury Secretary Scott Bessent departs following trade talks at Lancaster House in London June 10. (Chris J. Ratcliffe/Bloomberg)
The core tenet of U.S. technology controls on China — an effective ban on imports of high-end chips from the likes of Nvidia Corp. — wasn’t on the table during talks in London, despite urging from Nvidia CEO Jensen Huang to reverse curbs he says have failed.
Some China hawks in Washington were somewhat relieved to see the U.S. offer lower-priority concessions to Beijing, safeguarding — at least for now — semiconductor measures they view as vital.
But some of those people, who requested anonymity to speak candidly, also are concerned that the Trump administration has set a dangerous precedent — raising the possibility of bigger concessions in the future.
The London accord doesn’t mark the first time Trump has eased an export control during trade talks with China. When Trump was working on a larger deal during his first term, the U.S. president lifted a ban on sales to ZTE Corp. at the personal request of President Xi Jinping. “Too many jobs in China lost,” Trump said in a post on Twitter in May 2018.
But this time, officials make no secret that the technology controls are part of, and a pawn in, the Trump team’s trade strategy. That could extend beyond the curbs announced over the past few weeks.
Chip Software
The recent curbs included a chaotic six-day period during which the agency’s Bureau of Industry and Security informed chip design software companies — including Synopsys Inc., Cadence Design Systems Inc. and Germany’s Siemens AG — that their China sales now require a U.S. government license. That was on the basis that shipments of those tools “pose an unacceptable risk” of serving a military purpose in China, Cadence said in a filing about the letter it received.
In another example, Energy Transfer LP, which makes ethane, said Commerce justified restrictions on its China exports because the natural gas component could be used in the country’s military-civil fusion strategy. Massive tankers containing ethane sat idle at U.S. ports after companies learned of the new rules requiring U.S. clearance for China-bound shipments — licenses the U.S. government later told one company it intended to deny.
The agency also imposed new approval requirements or revoked existing licenses for some jet engine technology and nuclear materials.
“I don’t have strong views on whether these specific controls are important for U.S. national security,” Geoffrey Gertz, a fellow at the Center for a New American Security and former National Security Council official, wrote on LinkedIn.
The key point, he wrote, is that the U.S. has “opened the door to negotiating away export controls” — and now, China and others “will keep on pushing this point.”
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