TRUMP HAS NO CHINA TRADE STRATEGY / THE WALL STREET JOURNAL REVIEW & OUTLOOK

Trump Has No China Trade Strategy

Washington and Beijing stage a tactical retreat that shows China’s leverage.

By The Editorial Board

Chinese President Xi Jinping and President Donald Trump in a composite image. Photo: evgenia novozhenina/Agence France-Presse/Getty Images

President Trump on Wednesday hailed the result of the latest trade talks with China as a great victory, but the best we can say is that it’s a truce that tilts in China’s direction.

Details are few, but the countries appear to be resetting their trade relationship to where it was a few months ago before a tit-for-tat escalation. 

Mr. Trump had agreed to reduce tariffs on China to 30% (55% including those he imposed during his first term) from 145% while China dropped its tariffs on U.S. goods to 10% from 125%.

But Beijing continued to leverage its stranglehold on rare-earth minerals and magnets, which are used in fighter jets, medical lasers, drones, electric-vehicle engines and more. 

China’s export controls forced some auto makers to idle plants, slowed production of drones needed in Ukraine, and threatened U.S. manufacturing.

Beijing will ease its restrictions on rare-earth minerals and magnets for six months while the U.S. will relax its restrictions on the sale of jet engines and ethane to China. 

The U.S. will keep its export controls on advanced chips, which are a hindrance to Mr. Xi’s AI ambitions though some developers like DeepSeek are using work-arounds.

The Administration also agreed to rescind restrictions on Chinese student visas so the children of Communist Party officials can study at U.S. universities. 

Trump officials claimed the purpose of the visa restrictions was to protect national security, but they may have been a bargaining chip to get Beijing to back down on rare-earth minerals.

Trade wars are mutually destructive, though Mr. Trump’s export controls harmed American businesses as well as the Chinese. 

China relies on U.S. ethane, a byproduct of oil and natural gas production, for its petrochemical manufacturing. 

Because the U.S. has few other export markets, Mr. Trump’s embargo could have throttled domestic oil and gas production.

U.S. manufacturers will no doubt welcome the rare-earth mineral reprieve, but China is keeping the gun on the bargaining table by putting a six-month limit on export licenses. 

That means if trade tensions flare again, Mr. Xi can resort to the same threat.

China first weaponized its dominance in rare-earth minerals in a conflict with Japan in 2010 involving the Senkaku Islands, but the U.S. and its allies were slow to develop alternatives. 

Will they now get the message?

Developing an alternative supply will take years and require cooperation with allies because the U.S. can’t produce and process all the rare earths it needs. 

Japan has pitched a rare-earths alliance as part of tariff negotiations, and the Administration would be wise to expand such a partnership with other allies.

This gets to the larger problem with Mr. Trump’s tariff strategy—that is, he doesn’t have one. 

His latest walk-back shows he can’t bully China as he tried to do in his first term. China has leverage of its own.

A smarter trade strategy would be to work with allies as a united front to counter China’s predatory trade practices. 

Instead, Mr. Trump has used tariffs as an economic scatter-gun against friends as well as foes. 

This increases China’s leverage, and, like this week’s trade truce, that’s nothing to cheer about.