[why&next] Key Issues in Upcoming US-China Talks: Semiconductors, AI, and Strategic Minerals in Focus

Key Issues in Future Negotiations:
Focus on Technology and Resource Sectors
Fentanyl and TikTok Expected to Be Discussed

As the US-China trade war has effectively entered a 'truce' phase, advanced technology sectors such as electric vehicles, semiconductors, and artificial intelligence (AI), as well as rare earths and strategic minerals, are expected to become key issues in future negotiations. Additionally, topics such as fentanyl, which served as a background for the US tariffs on China, and TikTok?which is under pressure to be sold by US President Donald Trump?are also expected to be brought to the negotiating table. Some observers suggest that, ahead of the Communist Party Politburo meeting and amid increasing economic and political pressure, China may seek a smooth trade agreement with the US by expanding imports from the US or increasing investment within the United States.

On May 10-11, the United States and China held their first high-level trade talks in Geneva, Switzerland, and agreed to lower reciprocal tariff rates by 115 percentage points each. As a result, US tariffs on Chinese imports have been reduced from 145% to 30%, and China has lowered its tariffs on US products from 125% to 10%.

The two countries also agreed to continue additional negotiations aimed at stabilizing trade. On May 12 (local time), US Treasury Secretary Scott Besant appeared on CNBC and said, "It looks like we will meet again within a few weeks to resume negotiations for a comprehensive agreement."

While previous US-China negotiations focused on resolving bilateral conflicts and substantially lowering tariff rates, future talks are expected to intensify in the fields of technology and resources.

The Hong Kong-based South China Morning Post (SCMP) reported on May 13, "Analysts expect that in the US-China trade negotiations to be held over the next 90 days, China will urgently address issues such as tariffs on electric vehicles, semiconductor trade, and the AI sector."

On the US side, rare minerals are likely to become a core agenda item. As part of the agreement, the Chinese government decided to temporarily suspend or withdraw non-tariff retaliatory measures targeting the US that had been implemented since April 2. These measures included adding certain US companies to a sanction list and imposing export controls on rare earths.

However, on May 12, prior to the announcement of the agreement, China's Ministry of Commerce stated, "Export controls on core minerals and rare earths remain in place, and we will strengthen crackdowns on illegal activities that attempt to circumvent export controls in the strategic minerals sector." This is interpreted as a signal that China intends to use strategic minerals as a bargaining chip in future negotiations with the US.

Rare earths, which are essential for the production of the US military's latest fighter jets and nuclear submarines, are monopolized globally by China. As China wielded the rare earth export control card, analysts noted that the US vulnerability regarding rare earths was fully exposed. US financial media outlet CNBC reported, "US companies are also concerned about China's restrictions on exports of rare earths, magnets, and other critical minerals."

Experts also believe that the Trump administration will bring issues such as blocking China's fentanyl exports, excessive Chinese government subsidies, and TikTok to the negotiating table. Myron Brilliant, senior advisor at DGA-Albright Stonebridge Group, said, "The next 90 days will be a crucial period to secure practical measures on issues like fentanyl and purchase commitments," but added, "It is still unclear to what extent China will make concessions."

Neo Wang, chief China economist and strategist at Evercore ISI, a US investment bank, also stated, "If a trade agreement is not reached, China will need to quickly resolve the issue of the 20% tariff related to fentanyl," and added, "The issue of concessions regarding TikTok may also become more significant."

President Trump previously extended the deadline for the Chinese company ByteDance to sell TikTok's US operations to mid-June. This order is based on the national security law signed by former President Joe Biden in April 2024.

The Trump administration plans to make the expansion of China's purchases of US products and the increased market access for US companies in China key agenda items in future negotiations. In an interview with CNBC, Secretary Besant stated, "The 2020 US-China Phase One Trade Agreement can serve as a starting point for future negotiations," and argued, "The problem was that the Biden administration did not properly implement this agreement." He also said he would strongly demand that China fulfill its promise to increase imports of US agricultural products.

There is also analysis that President Trump could gain a favorable position in additional negotiations. After the tariff war with the US, China is feeling both internal and external political and economic pressure, and may comply with President Trump's demands in pursuit of a smooth agreement with the US.

Chief economist Neo Wang diagnosed, "China could lose more in future negotiations," and added, "In particular, economic and political pressures are mounting ahead of the Chinese Communist Party Politburo meeting."

However, some point out that, given the complexity of the issues, 90 days is too short a period to reach a substantive agreement between the two countries. Wendy Cutler, vice president of the Asia Society Policy Institute, noted, "There are too many issues to address, such as China's overcapacity, subsidy problems, and origin laundering," and pointed out, "Such negotiations usually take more than a year."

In particular, if negotiations break down after the 90-day grace period, there is a possibility that trade tensions could escalate again. Larry Hu, chief economist at Macquarie Securities, warned, "This agreement is positive for investors, but it is only a 'truce' rather than a fundamental solution," and added, "China's exports to the US are still expected to decrease by 36%, which could lower China's GDP growth rate by 1 percentage point."