To lock up a trade deal with China, President Donald Trump has reportedly authorized Treasury Secretary Scott Bessent to lift trade restrictions in place with the U.S.’ chief rival for the world’s economic superpower.
The lifting of export controls is the ace in a hole for Bessent as the U.S. and Chinese officials meet for trade talks Monday in London, sources told The Wall Street Journal.
“Historically, export controls have never been used as leverage for trade negotiations,” Akin Gump Strauss Hauer & Feld’s Kevin Wolf told the Journal. “There is no precedent for this.”
Among the products under trade controls with China in play, according to sources, will be jet engines and parts, software to produce chips, and ethane, a natural gas component for manufacturing plastics.
Top U.S. and Chinese officials were meeting in London on Monday to try to defuse a high-stakes trade dispute that has widened from tariffs to restrictions over rare earths, threatening a global supply chain shock and slower economic growth.
On the first of likely two days of talks, officials from the two superpowers were meeting at the ornate Lancaster House to try to get back on track with a preliminary agreement struck last month in Geneva that had briefly lowered the temperature between Washington and Beijing.
Since then the U.S. has accused China of slow-walking on its commitments, particularly around rare earths shipments.
White House economic adviser Kevin Hassett said Monday that the U.S. team wanted a handshake from China on rare earths after Trump said Xi Jinping had agreed to resume shipments in a rare call between the two presidents last week.
“The purpose of the meeting today is to make sure that they’re serious, but to literally get handshakes,” Hassett, director of the National Economic Council, told CNBC in an interview.
He said the U.S. would expect export controls to be eased and rare earths released in volume immediately afterward.
The talks come at a crucial time for both economies, which are showing signs of strain from Trump’s cascade of tariff orders since his return to the White House in January.
Customs data showed China’s exports to the U.S. plunged 34.5% year-on-year in May in value terms, the sharpest drop since February 2020, when the outbreak of the COVID-19 pandemic upended global trade.
Attending the talks in London are Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer, and a Chinese contingent helmed by Vice Premier He Lifeng.
The inclusion of Lutnick, whose agency oversees export controls for the U.S., is one indication of how central rare earths have become. China holds a near-monopoly on rare earth magnets, a crucial component in electric vehicle motors.
Lutnick did not attend the Geneva talks at which the countries struck a 90-day deal to roll back some of the triple-digit tariffs they had placed on each other.
Information from Reuters was used to compile this report.
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