Why US-China trade talks in Malaysia are crucial to paving way for Xi-Trump summit
Analysts say both sides have leverage to wield, and the cards they play could fuel or de-escalate tensions
With the US threatening to leverage its software strengths ahead of fresh trade talks with China in response to its recent export controls on rare earths, analysts say Beijing is unlikely to make major concessions, though progress could be made on issues such as soybeans or fentanyl.
As the world’s two largest economies gear up for a fifth round of talks this weekend in Malaysia’s capital city, Kuala Lumpur, the move appears to be a pressure tactic aimed at Beijing to compel a response on its recent rare earth restrictions, according to Jayant Menon, visiting senior fellow at the ISEAS – Yusof Ishak Institute.
“At one level, it can be viewed as simply part of an aggressive negotiation strategy, designed to intimidate in order to secure the best deal possible,” Menon said. “It also indirectly reflects how concerned the US is about the recent controls on exports of rare earths.”
But if Washington plays the tech card, Menon said, it would likely have little effect, as Beijing has demonstrated that it will not be coerced.
Nick Marro, principal economist for Asia at the Economist Intelligence Unit, also said he did not expect Beijing to make major concessions in terms of rare earth export controls, despite a potential chokehold on the hi-tech manufacturing industry if software-related restrictions were to materialise.
“If the US does put strong controls over the export of software, this could have significant midstream and downstream implications, given that US software goes into everything,” he said, adding that it would mark a significant escalation of US-China trade tensions.
“For China, we’re not expecting it to significantly dismantle its rare earth export control regime, given that Beijing is increasingly comfortable with exerting its dominance over this part of global industry,” Marro said.
Trade tensions have continued to escalate in recent weeks, with both sides unleashing a series of economic sanctions targeting each other’s strategic industries, including rare earths, shipping and technology.