The stage of international trade has never been silent. Recently, several key negotiations have been on the nerves of the global supply chain. There are both glimmers of breakthroughs and fierce battles among major powers. Let’s focus on the three groups of developments between the United States and Mexico, India and the United States, and China and the United States.
After intense consultations, the United States and Mexico have seen a turning point in the steel trade dispute. According to multiple authoritative reports, the two sides are close to reaching an important agreement. The core lies in: opening a “quota window” for the 25% steel tariff wall built during the Trump era.
According to the negotiation framework, American buyers will be exempted from this tariff when their imports do not exceed the annual quota set based on historical trade volume. This means that Mexican steelmakers have regained certainty and some cost advantages in entering the US market. More notably, the quota level proposed in the new agreement is believed to be higher than the standard of the old agreement reached by both sides during Trump’s first term (which was limited by the average level from 2015 to 2017 at that time).
Data from the US Department of Commerce shows that Mexico is an important source of steel for the United States. Last year, its import volume accounted for approximately 12% of the total US imports, reaching about 3.2 million tons. The conclusion of the new agreement will alleviate the cost pressure on steel-dependent industries such as North American automotive manufacturing and promote the stability of the regional supply chain. The opening of this “quota window” is a positive signal that the two countries are seeking practical solutions and easing trade frictions.
Turn our eyes to India and the United States. Trade negotiators from the two countries are making a final push with the aim of finalizing a provisional trade agreement for “early harvest” by the end of this month. The focus of the negotiations is clear: reducing tariffs on industrial products, finalizing market access for some agricultural products, and reducing non-tariff barriers to digital trade.
Progress seems to exist, but the differences are equally significant. India has held its ground and explicitly rejected the US demand that it open its import markets for wheat, dairy products and corn. As a balance, the Indian side may consider offering more favorable tariffs on high-value US nut products such as almonds, pistachios and walnuts. Meanwhile, the United States responded coldly to India’s demand for it to abolish the 10% benchmark tariff. Us negotiators even cited the newly reached trade agreement between the United States and the United Kingdom as a “precedent” for maintaining the tariff.
In terms of negotiation strategies, both sides demonstrated a pragmatic attitude: they prioritized addressing areas where consensus was relatively easy to reach (i.e., “early harvest”), while leaving more challenging issues such as intellectual property rights and labor standards to subsequent stages. The goal is to officially sign this first part of the agreement in September or October this year. Whether the “final push” at the end of the month can succeed tests the willingness of both sides to compromise.
The most globally watched event is undoubtedly the trade negotiations between China and the United States held in London. The core contradictions at the negotiating table are highly condensed in two words: chips and rare earths. This game has a profound impact on the global technology industry and strategic security.
Although the United States has imposed a strict technological blockade on China in the field of high-end chips (especially 7 nanometers and below), its own supply chain is not monolithic. The shortage of chips in the civilian sector, such as in the automotive industry, is still fresh in people’s memory. In the military field, the vulnerability of key chip supplies has always been a hidden concern for the Pentagon.
The predicament peaked in the field of rare earths. China controls the global rare earth industry chain, especially the refining capacity and cutting-edge application technologies. The supply of heavy rare earth elements such as dysprosium and terbium necessary for the motors of F-35 fighter jets is highly dependent on China. Although the United States and its Allies (Australia, Canada, etc.) possess mineral resources, there are gaps that are difficult to overcome in the short term in terms of refining technology, environmental protection treatment, cost control, etc.
The data from the United States Geological Survey (USGS) is shocking – the United States requires approximately 52,000 tons of rare earths annually, with a domestic supply shortage of 4,800 tons, resulting in a gap of over 91%. The explosive growth of new energy vehicles and artificial intelligence is expected to push future demand to around 150,000 tons. This huge and ever-expanding gap has become the “Sword of Damocles” hanging over the heads of the high-tech and defense industries in the United States. The risk of supply chain disruptions has even been assessed as potentially affecting the advancement of key defense projects (such as the space defense system “Dome” mentioned in the report) and combat readiness capabilities.
The restart of key domestic rare earth smelters (such as Mountain Pass) faces lengthy obstacles from strict environmental regulations (the revision of the Toxic Substances Control Act (TSCA)); Seeking overseas alternative supplies (such as Vietnam, Japan, etc.) has frequently encountered environmental protection incidents (such as the arsenic pollution pilot in Vietnam mentioned in the report) and production capacity bottlenecks.
China is fully aware of its irreplaceability in rare earths, especially in the field of high-performance and military-grade rare earths.
Media reports show that China put forward a clear consideration in the negotiations:
It is demanded that the US allow the Dutch company ASML to export photolithography machines for mature processes (such as 14-nanometer) to China to ensure the stable production of enterprises like SMIC.
Demand that the US lift a large number (reportedly 352 items) of punitive tariffs on Chinese goods, especially resume the export of Chinese photovoltaic modules to the US.
It is required to participate in cutting-edge technological cooperation such as international nuclear fusion projects.
A stern warning is issued that any arms sales to Taiwan will trigger China’s embargo on heavy rare earths to the United States.
It has been clearly stated that the rare earth export quota will not be unconditionally expanded, and the supply must be based on mutually beneficial agreements.
Facing urgent supply chain crises (affecting military industry, new energy, and AI), risks of delays in major defense projects, and political pressure from midterm elections, the time window for the US to seek breakthroughs is limited.
Analysis generally holds that China is relatively more resilient in enduring short-term trade losses, while the US military and high-tech industries have an extremely low tolerance for rare earth supply disruptions. The strategic nature of rare earth resources gives China an advantage in the competition of “strategic endurance”.
Despite the intense negotiation atmosphere (described in the report as “felt on both sides of the Atlantic and Indian Oceans”), based on the huge common economic interests of both sides and the consideration of avoiding a lose-lose situation, the mainstream analysis still believes that reaching some form of consensus (even if it is only phased or partial) is a highly likely event. Us media speculate that the possibility of the US making substantive concessions (such as easing the control on some chips and removing some tariffs) is relatively high. China, on the other hand, may make certain arrangements for the supply of civilian rare earths, but the embargo on military rare earths and its core stance are expected to be adhered to. The breakdown of negotiations (such as triggering the Section 301 investigation and a comprehensive rare earth embargo by China) is regarded as a low-probability event with relatively high risks.
The chess game of international trade is undergoing a profound reconstruction. The adjustment of steel quotas between the United States and Mexico is a practical move for regional supply chains to seek rebalancing. The “early harvest” of India and the United States is a crucial step for the two emerging and developed economies to explore new models of cooperation. The intense competition between China and the United States over chips and rare earths in London has intertwined technological sovereignty, supply chain security and geopolitical competition. Its outcome will have a profound impact on the global technology industry landscape and economic development.
Whether it is the “opening of the window” of the quota system, the sprint of “early harvest”, or the thrilling exchange of chips between China and the United States, all clearly convey a signal: in the era of globalization that is interdependent and highly competitive, pure confrontation is no longer sustainable. Seeking a certain degree of “competitive cooperation” balance and risk management has become a realistic issue that major countries have to face. The world is holding its breath to see how these trade negotiations unfold and jointly shape the economic landscape of the future.
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