On June 5, US President Donald Trump and Chinese President Xi Jinping held their first direct phone conversation since Trump began his second term, occurring amid escalating tensions in the US-China trade war. This call resulted in a reported agreement to resume rare earth mineral exports to the US and reciprocal invitations for visits. While easing some immediate trade friction, the interaction also highlighted underlying power dynamics and China’s strategic leverage in the dispute.
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The Critical Role of Rare Earths
The phone call took place against a backdrop of strained US-China relations, particularly highlighted by Beijing’s willingness to use its significant position in rare earth materials. China had previously suspended rare earth shipments to major American companies following the US imposition of new tariffs.
Despite a 90-day tariff truce agreed upon in Geneva on May 12, ongoing negotiations have been complicated by fundamental structural differences, including disputes over currency, subsidies, and other non-tariff barriers.
Under the terms of the Geneva agreement, China was expected to suspend or lift its rare earth export ban. The US accused China of delaying this process, while Beijing countered that the US first violated the agreement through actions like new export controls on AI chips, bans on electronic design automation software, and plans to revoke visas for Chinese students.
For instance, Trump’s order banning American companies from using AI chips by China-based Huawei, issued just one day after the Geneva agreement, was perceived in Beijing as contradicting the spirit of the deal and may have contributed to the delay in rare earth exports.
US auto manufacturing relies on supply chains for essential materials
The US auto industry, heavily reliant on rare earth materials from China for components, faced significant production risks due to these restrictions. Trump’s apparent prioritization of resuming these exports underscored America’s dependence, a point likely noted by the Chinese leadership.
Strategic Framing of the Call
Beyond the specific trade issues, the phone call served as a stage for conveying subtle messages about leadership and negotiation strength.
Just a day before the call, Trump described President Xi on social media as “VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!” The subsequent conversation, and how it was framed, likely reinforced this image for both Chinese and international audiences.
China’s official statement on the call highlighted that Xi “took a phone call from U.S. President Donald J. Trump,” subtly suggesting Trump initiated the contact. This framing, along with China’s note that the Geneva talks were “at the suggestion of the U.S. side,” supports the narrative that Xi holds the stronger position and that China did not yield easily to US trade pressure.
During the earlier escalation of the trade war, Washington appeared to believe it could achieve “escalation dominance” through tariffs, potentially underestimating China’s response capabilities and eagerness to negotiate.
Prior to the June 5 call, Trump had publicly expressed hope that Xi would call him. Xi did not initiate contact, and ultimately, it was Trump who reached out. This sequence of events likely bolstered Xi’s image domestically and potentially weakened Trump’s negotiating stance.
China’s official statement following the call stated, “The Chinese side is sincere about this, and at the same time has its principles. The Chinese always honor and deliver what has been promised. Both sides should make good on the agreement reached in Geneva.” This wording appeared designed to signal internationally that the US, not China, was seen as failing to uphold the Geneva commitments.
The Chinese statement also noted Trump’s reported expression of “great respect for President Xi” and the importance of the US-China relationship, along with statements about wanting the Chinese economy to do well, working together, honoring the one-China policy, and welcoming Chinese students. While partly standard diplomatic language, this summary aimed to portray Trump as accommodating towards China’s positions, including on non-trade issues like student visas.
Looking Ahead: Lingering Challenges
The Trump-Xi call appears to have temporarily eased some immediate tensions. Reports indicate China has since issued temporary export licenses for rare earth materials to suppliers of the top three US automakers. For China, Trump’s remarks seemingly helped reduce anxiety over issues like Taiwan and student visa restrictions.
However, the deep-seated differences between the two countries on fundamental trade and economic matters remain significant. Recalling the repeated stalls and restarts in trade negotiations during Trump’s first term, there is a high likelihood that future talks could face similar challenges.
Compared to the trade war during Trump’s first administration, Beijing appears better prepared and more adept at using its control over rare earth exports as a strategic bargaining chip.
President Trump may face greater pressure in these negotiations. A collapse in talks could lead to supply chain disruptions, potentially contributing to inflation, market volatility, and economic difficulties in the US, with political ramifications ahead of upcoming elections. Xi is likely aware of this leverage, holding rare earth materials as a key tool.
Should trade negotiations falter, Trump might again find himself needing to reach out to Xi, an action that could further reinforce Xi’s image as the more dominant figure in the relationship.
To understand the context of these developments, explore our previous coverage on the US-China trade war and the Geneva agreement.
