Trump finalizes rare earths deal with Xi as he presses EU to break with China

Since his return to the White House in January, the president of the United States has not stopped pressuring European allies to toughen their policy towards the Asian giant. If he wanted a tariff agreement with Washington, Brussels had to break with Beijing.

The president Ursula von der Leyen came to weigh at the beginning of the year redirect relations with Chinaseriously deteriorated by its support for the Kremlin during the war in Ukraine, precisely as an alternative to Trump’s tariff aggressiveness.

However, the Community Executive soon corrected course and offered the president of the United States an alliance to confront Beijing, which was one of the pillars of the trade agreement that Von der Leyen and Trump signed in July in Scotland.

just when The EU was preparing to press the ‘nuclear button’activating the Instrument Against Economic Coercion for the first time in response to China’s restrictions on rare earths, Trump goes off the hook by announcing that he will sign a trade agreement with Xi Jinping this same Thursday at the APEC summit in South Korea.

If this pact is confirmed and leads to a new phase of economic cooperation between the two powers, the EU runs a strong risk of being left caught in a ‘pincer’ between the United States and China.

“The EU has not been able to develop sufficient levers of pressure to respond to either Trump or China. It has confident that the rules of international trade would be maintained and that strategy has turned out to be wrong,” Alicia García Herrero, chief economist for Asia-Pacific at Natixis and Bruegel researcher, explains to EL ESPAÑOL.

“That is why Europe is now in a situation of enormous weakness in the face of two realities, the United States and China, that use their power very well, and not the rules,” emphasizes García Herrero.

At the center of the debate is the battle for rare earthsfundamental ingredients for strategic industries such as automobiles, the military or semiconductors. Beijing produces 90% of the world’s refined rare earths and rare earth magnets.

On October 9, the Chinese Ministry of Commerce announced new export controls on rare earths. A retaliatory measure against the United States, but which has hit the European industry squarely and immediately, that already suffers from shortage problems.

Trump’s immediate response was to threaten an additional 100% tariff on imports from the Asian giant starting November 1, while Brussels has limited itself to repeatedly conveying its displeasure to the Chinese authorities.

In the case of the United States, the pressure has paid off: the trade agreement that Trump and Xi will sign this Thursday in South Korea expects Beijing to postpone export controls on rare earths for one year. In exchange, Washington freezes, for the moment, 100% tariffs against China.

In contrast, The EU has not yet found a solution to the rare earth crisis. This same Thursday, Brussels awaits the visit of a high-level Chinese delegation – whose final composition has not yet been revealed – to continue negotiating.

At the summit held last week, the French president, Emmanuel Macronasked Von der Leyen to activate the Instrument against Economic Coercion, a measure that does not rule out Germany, the country most affected by the new Chinese restrictions.

“In the short term, we are focused on finding solutions with our Chinese counterparts. But we are ready to use all the instruments in our toolbox to respond if necessary“Von der Leyen said in a speech this Saturday, just before the agreement between the US and China was announced.

The president assured that she would work with the G7 countries “in a coordinated response”, which in the end has not occurred.

Von der Leyen is also preparing a new plan called RESourceEUwhose objective is to guarantee access to alternative sources of critical raw materials for the European industry, promoting new agreements with countries such as Ukraine, Australia, Canada, Kazakhstan, Uzbekistan, Chile or Greenland.

“This marks a change from Europe’s traditional caution, but the world we face today rewards speed, not hesitation. Because today’s world is unforgiving. And the global economy is completely different than it was even a few years ago. Europe cannot do things the same way“admits the president of the Commission.