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Business Standard
04-07-2025
- Business
- Business Standard
Trump's Vietnam deal signals China tariffs unlikely to ease further
Chinese goods face 55% tariffs, likely through August. Under the Vietnam deal, the US will impose 20% tariffs on Vietnamese exports and 40% on transshipped goods to curb Chinese tariff evasion Bloomberg President Donald Trump's new trade deal with Vietnam sends a clear signal about where US tariffs on Chinese goods might ultimately land, as talks between Washington and Beijing continue following their recent truce. Chinese goods currently face tariffs of around 55 per cent, a level expected to remain through August. But under the latest Vietnam agreement, the US will slap a 20 per cent tariff on Vietnamese exports to the US and a steeper 40 per cent levy on goods deemed to be transshipped — the latter targeting a well-worn backdoor used by Chinese exporters since the first China-US trade war to dodge American tariffs. By closing the loopholes, the Trump administration is signaling what any future deal with China might look like. The 40 per cent tariff on transshipped goods suggests that even if tariffs on China are eventually reduced, they're unlikely to fall significantly below that threshold. 'The 40 per cent figure in the Vietnam deal might reflect a broader conviction in the Trump administration about the appropriate tariff level on China, which would be similarly reflected in other bilateral deals,' said Gabriel Wildau, a managing director at Teneo focused on political risk analysis in China. 'However, I am skeptical that Trump has a specific red line for minimum tariffs on China.' Beijing and Washington reached a trade framework last month following talks in London, which remains in effect through mid-August. As part of the deal, China agreed to resume shipments of rare earths — key inputs for wind turbines, electric vehicles and military hardware. In return, the US offered to ease some export restrictions on ethane, chip-design software and jet engine components. US tariffs on Chinese goods have been cut back to around 55 per cent, down from as high as 145 per cent in early April. But 20 per cent tariffs tied to fentanyl remain in place. Beijing has since tightened controls on two precursor chemicals used to make the drug — one of the few obvious avenues it has to win further tariff relief. 'The 20 per cent is really the focal point where all the attention is centered right now,' said Christopher Beddor, deputy China research director at Gavekal Research. 'The thinking is that the Chinese government is very willing to do a deal on something related to fentanyl. They've been telegraphing that for months.'' Still, those efforts are unlikely to bring Chinese tariffs below the 40 per cent rate now applied to Vietnam. If China's duties were to fall to 35 per cent, for instance, it would restore a competitive edge to China and encourage firms to shift operations back, running counter to the Trump administration's broader objectives. 'If China ends up with a lower tariff level than Vietnam that would certainly shift the competitiveness calculations somewhat, but keep in mind that moving production facilities is not as easy as flipping a light switch on and off,' said Stephen Olson, a former US trade negotiator now with the ISEAS-Yusof Ishak Institute. 'From the perspective of Chinese companies, there is zero confidence that once Trump sets a tariff level that it will remain at that level.' For now, there are signs both sides are following through on the terms of the London agreement and displaying signs of goodwill. The Trump administration has lifted recent export license requirements for chip design software sales in China, and approved US ethane exports to China without additional approvals. Treasury Secretary Scott Bessent said Chinese rare earth magnets are flowing, although they haven't yet bounced back to the levels seen before China imposed export curbs in early April. The US remains hopeful that China will further ease restrictions on those exports after their London deal, he said in an interview Tuesday on Fox News. Meanwhile, a senior Chinese official on Thursday delivered one of Beijing's most positive messages about his nation's ties with the US in weeks. Liu Jianchao, head of the Communist Party's International Department, said at the World Peace Forum that he was 'optimistic' about future relations. China is keenly aware of what it's gained from China-US cooperation,' Liu said 'Our cooperation is mutually beneficial. The act of putting up barriers will hurt the other and ourselves as well.' Other negotiations Apart from Vietnam, Beijing is growing increasingly cautious about US efforts to strike trade deals that could isolate China. With a July 9 deadline approaching, when Trump's higher 'reciprocal' tariffs are set to take effect, American officials are ramping up negotiations with key partners in Asia and Europe. What Bloomberg Economics says... 'The looming question now is how China will respond. Beijing has made clear that it would respond to deals that came at the expense of Chinese interests and the decision to agree to a higher tariff on goods deemed to be 'transshipped' through Vietnam may fall in that category. Given China's position as Vietnam's largest trading partner and key source of inputs for domestic production, any retaliatory steps could have an outsized impact on Vietnam's economy.' — Rana Sajedi and Adam Farrar. Click here to read the full report. Beijing on Thursday said it's taken note of the US-Vietnam trade deal and is currently assessing the situation. 'We're happy to see all parties resolve trade conflicts with the US through equal negotiations, but firmly oppose any party striking a deal at the expense of China's interests,' He Yongqian, a spokesperson for the Ministry of Commerce, said at a briefing. 'If such a situation arises, China will firmly strike back to protect its own legitimate rights and interests,' she added, repeating a familiar warning. Olson cautioned against relying too much on the US-Vietnam trade agreement as a blueprint for assessing Washington's approach to China. The stakes in US-China negotiations are significantly higher, shaped by strategic rivalry and a wider set of geopolitical considerations. There is also much less of a power discrepancy in the US-China discussions. 'One important takeaway for China from both the Vietnam deal and the previous deal with the UK is that the US intends to use these negotiations to apply pressure on China,' Olson said. 'This could lead China to a much more sober assessment of what it might be possible to achieve with the US in these negotiations.'
Sydney Morning Herald
25-06-2025
- Politics
- Sydney Morning Herald
An axis of bystanders: Iran conflict reveals true nature of an alliance the West feared
If the Iranian regime survives the conflict with its sworn enemies, it will be no thanks to its powerful autocratic comrades, China and Russia. With a fragile ceasefire now holding after Israel and the United States launched strikes on Iran's nuclear facilities, Tehran has emerged a more diminished and isolated figure on the international stage. Yet its supporters in Beijing and Moscow proved unwilling to come to its rescue – even as US President Donald Trump and his Israeli counterpart Benjamin Netanyahu mused openly about regime change. If Russia's invasion of Ukraine gave rise to a so-called new axis of CRINK powers (China, Russia, Iran and North Korea) – as many western experts argued it had, pointing to the countries' varying levels of support for Moscow's war efforts – then the past 12 days have demonstrated its limits. This unofficial grouping, according to a theory popularised in Washington circles, represents an emerging 'axis of upheaval', coalescing around a shared ideological view of anti-US hegemony and is pursued through strengthening diplomatic, economic and military ties. Loading But when tested this month, the heavy hitters – China and Russia – offered only rhetorical support for Iran. In Beijing's case, those statements were particularly cautiously worded. An 'axis of resistance' became an 'axis of bystanders', as Tom Miller from consultancy firm Gavekal Research put it. With its resources tied up in Ukraine, Russian President Vladimir Putin made it clear that no concrete support was coming from Moscow.
The Age
25-06-2025
- Politics
- The Age
An axis of bystanders: Iran conflict reveals true nature of an alliance the West feared
If the Iranian regime survives the conflict with its sworn enemies, it will be no thanks to its powerful autocratic comrades, China and Russia. With a fragile ceasefire now holding after Israel and the United States launched strikes on Iran's nuclear facilities, Tehran has emerged a more diminished and isolated figure on the international stage. Yet its supporters in Beijing and Moscow proved unwilling to come to its rescue – even as US President Donald Trump and his Israeli counterpart Benjamin Netanyahu mused openly about regime change. If Russia's invasion of Ukraine gave rise to a so-called new axis of CRINK powers (China, Russia, Iran and North Korea) – as many western experts argued it had, pointing to the countries' varying levels of support for Moscow's war efforts – then the past 12 days have demonstrated its limits. This unofficial grouping, according to a theory popularised in Washington circles, represents an emerging 'axis of upheaval', coalescing around a shared ideological view of anti-US hegemony and is pursued through strengthening diplomatic, economic and military ties. Loading But when tested this month, the heavy hitters – China and Russia – offered only rhetorical support for Iran. In Beijing's case, those statements were particularly cautiously worded. An 'axis of resistance' became an 'axis of bystanders', as Tom Miller from consultancy firm Gavekal Research put it. With its resources tied up in Ukraine, Russian President Vladimir Putin made it clear that no concrete support was coming from Moscow.
Business Times
21-06-2025
- Business
- Business Times
Trump pledge of quick China magnet flows has yet to materialise
[HONG KONG] Almost 10 days since US President Donald Trump declared a 'done' trade deal with Beijing, US companies remain largely in the dark on when they will receive crucial magnets from China, and whether Washington, in turn, will allow a host of other exports to resume. While there has been a trickle of required permits, many American firms that need Chinese minerals are still waiting on Beijing's approval for shipments, according to sources familiar with the process. China's system is improving but remains cumbersome, they said, contrary to Trump's assurances rare earths would flow 'up front' after a Jun 11 accord struck in London. The delays are holding an array of American industries hostage to the rocky US-China relationship, as some firms wait for magnets and others face restrictions son elling to China. That friction risks derailing a fragile tariff truce clinched by Washington and Beijing in Geneva last month, and triggering fresh rounds of retaliation. Interviews with multiple Western buyers, industry insiders and officials familiar with discussions revealed frustration over vague policies in both countries and lingering confusion about what level of magnet approvals from China would trigger Trump to abandon his tit-for-tat export curbs. 'Even if export approvals accelerate, there are so many unknowns about the licensing regime that it's impossible for companies to have a strong sense of certainty about future supply,' said Christopher Beddor, deputy China research director at Gavekal Research. 'At a minimum, they need to factor in a real possibility that talks could break down again, and exports will be halted.' In response to China's sluggishness on magnets, Trump last month restricted US firms from exporting chip software, jet engines and a key ingredient to make plastic to China until President Xi Jinping restores rare-earth exports. Companies subject to Washington's curbs have halted billions of US dollars in planned shipments as they wait for players in unrelated sectors to secure permits from Beijing, which could take weeks or even months to process, given the current pace. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Corporate chiefs affected by the export-control spat have sought clarity from the administration on its strategy, according to sources familiar with the matter. The Commerce Department, which administers the rules, has offered few details, they added. Oil industry executives have tried to convince Trump officials that blocking exports of ethane – a gas used to make plastics – is contrary to US national security interests, according to sources familiar with the deliberations. Business leaders have asked for export restrictions to be removed but that's been unsuccessful so far, the sources said. Energy and chemical giant INEOS Group Holdings has one tanker full of ethane waiting to go, while Enterprise Products Partners has three to four cargo ships stuck in limbo, according to a source familiar with the matter. That's particularly galling because China has adequate ethane supplies in reserve and can switch to using naphtha from the Middle East and other regions for much of their production, the sources said. Representatives from the companies did not respond to requests for comment. Industry figures have consistently told the Trump administration the ethane export restrictions are inflicting more pain on US interests than on China, according to the sources. China's Ministry of Commerce, which administers export licenses, has not responded to Bloomberg's questions on how many for rare earths have been granted since the London talks. At a regular briefing in Beijing on Thursday, spokesperson He Yadong said Beijing was 'accelerating' its process and had given the go-ahead to a 'certain number of compliant applications'. Access to rare earths is an issue 'that is going to continue to metastasise until there is resolution,' said Adam Johnson, chief executive officer of Principal Mineral, which invests in US mineral supply chains for industrial defence. 'This is just a spigot that can be turned on and off by China.' China only agreed to grant licenses, if at all, for six months, before companies need to reapply for approvals. Firms doing business in the US and China could see recurring interruptions, unless the Commerce Ministry significantly increases its pace of process applications. Adding an extra layer of jeopardy for US companies, Chinese suppliers to America's military-industrial base are unlikely to get any magnet permits. After Trump imposed sky-high tariffs in April, Beijing put samarium – a metal essential for weapons such as guided missiles, smart bombs and fighter jets – on a dual-use list that specifically prohibits its shipment for military use. Denying such permits could cause ties to further spiral if Trump believes those actions violate the agreement, the terms of which were never publicised in writing by either side. That sticking point went unresolved during roughly 20 hours of negotiations last week in the UK capital, sources familiar with the details said. Complicating the issue, companies often buy magnets from third-party suppliers, which serve both defence and auto firms, according to a person familiar with the matter. That creates a high burden to prove to Chinese authorities a shipment's final destination is a motor not a missile, the source added. Beijing still has not officially spelt out the deal's requirements, nor has Xi publicly signalled his endorsement of it – a step Trump said was necessary. 'The Geneva and London talks made solid progress towards negotiating an eventual comprehensive trade deal with China,' White House spokesperson Kush Desai said. 'The administration continues to monitor China's compliance with the agreement reached at Geneva.' China's Commerce Ministry is working to facilitate more approvals even as it asks for reams of information on how the materials will be used, according to sources familiar with the process. In some cases, companies have been asked to supply data including detailed product designs, one of the sources said. Morris Hammer, who leads the US rare-earth magnet business for South Korean steelmaker Posco Holdings, said Chinese officials have expedited shipments for some major US and European automakers since Trump announced the agreement. China's Advanced Technology & Materials said on Wednesday it had obtained permits for some magnet orders, without specifying for which destinations. The company's customers include European aerospace giant Airbus SE, according to data compiled by Bloomberg. Around half of US suppliers to Toyota Motor, for example, have had export licenses granted, the company said – but they're still waiting for those materials to actually be delivered. It's likely some of the delays are transport-related, one of the sources said. Even with permits coming online, rare-earth materials are still scarce because overseas shipments were halted for two months starting in April, depleting inventories. Trump's agreement 'will allow for rare earths to flow out of the country for a short period of time, but it's not helping the auto industry because they are still talking shutdowns', Hammer said. 'Nobody trusts that this thaw is going to last.' For many automakers, the situation remains unpredictable, forcing some to hunt for alternatives to Chinese supplies. Two days after Trump touted a finalised trade accord in London, Ford Motor chief executive officer Jim Farley described a 'day-to-day' dynamic around rare-earths licenses – which have already forced the company to temporarily shutter one plant. General Motors has emphasised it's on firmer footing in the longer term, because it invested in domestic magnet making back in 2021. The automaker has an exclusive deal to get the products from MP Materials in Texas, with production starting later in the year. It has another deal with eVAC of Germany to get magnets from a South Carolina plant starting in 2026. In the meantime, GM and its suppliers have applied for permits to get magnets from China, a source familiar with the matter said. Scott Keogh, the CEO of Scout Motors – the upstart EV brand of Volkswagen – told Bloomberg Television his company is re-engineering brakes and drive units to reduce the need for rare earths. Scout is building a plant in South Carolina to make fully electric and hybrid SUVs as well as trucks starting in 2027. Until the rare-earth supply line is reopened to Washington's satisfaction, Trump has indicated that the US is likely to keep in place its own export restrictions. Senior US officials have suggested the curbs are about building and using leverage, rather than their official justification: national security. Commerce Secretary Howard Lutnick said the measures were used to 'annoy' China into complying with a deal US negotiators thought they'd already reached. Restrictions on sales to China of electronic design automation (EDA) software for chipmaking are emblematic of the standoff. Those EDA tools are used to design everything, from the highest-end processors for the likes of Nvidia and Apple to simple parts, such as power-regulation components. Fully limiting China's access to the best software, made by a trio of Western firms, has been a longtime priority in some Washington national security circles – and would build on years of US measures targeting China's semiconductor prowess. While some senior Trump officials specifically indicated the administration would relax some semiconductor-related curbs if Beijing relents on rare earths, EDA companies still lack details on when, and whether, their China access will be restored, said industry officials who requested anonymity to speak candidly. Even if that happens, there's a worry that heightened geopolitical risks will push Chinese customers to hunt for other suppliers or further develop domestic capabilities. 'The risk is there for the London deal to fall apart,' said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis. 'Because rare earths is a very granular issue and mistakes can be made.' BLOOMBERG
The Star
13-06-2025
- Business
- The Star
Xi plays long game on US-China trade as Trump seeks quick wins
WASHINGTON: While Donald Trump hailed the outcome of trade talks in London, Xi Jinping walked away with an understated strategic gain: a negotiating process that buys China time and helps defuse the threat of more harmful tariffs and technology curbs. Shortly after two days of negotiations wrapped, Trump declared Wednesday (June 11) on social media that a deal had been "DONE' to restore the flow of critical magnets from China, and pledged to lift curbs on student visas. Hours earlier, US Commerce Secretary Howard Lutnick revealed Washington would unwind its recent tech curbs, if niche metals essential to US auto and defense firms now flowed fast enough. China's focus was very different. A People's Daily commentary on Thursday - Beijing's most substantial remarks so far on the talks - made no mention of export controls. Instead, the Communist Party mouthpiece touted an "institutional guarantee' established in Geneva for the two sides to bridge differences via a "consultation mechanism.' In a long-awaited leaders' call before the London negotiations, Xi told Trump the importance of using this channel, it added. The contrast illustrates a disconnect in how the world's biggest economies want to manage their trade dispute, and broader rollercoaster relationship. While Trump seeks quick deals done directly with top leaders, Xi favours a framework led by his lieutenants that wards against being blindsided. Such haggling could drag on for years, with the "Phase One' deal from the last trade war taking most of Trump's first term. "Xi is playing a longer game on US-China trade. His time in office is simply much longer than Trump's,' said Christopher Beddor, deputy China research director at Gavekal Research. "That's not to say there's never any short-term thinking, but the lack of term limits presents very different incentives than for Trump.' While slow-walking negotiations allows China the chance to assess how hard a bargain Trump drives with other nations, the lingering uncertainty is bad for business, he added. Xi showed last week he can be flexible, getting on the phone with Trump as ties spiralled, breaking from the normal protocol to set up such an interaction. In the Biden era, then National Security Advisor Jake Sullivan and Foreign Minister Wang Yi would huddle in overseas locations for days before their leaders spoke, managing outcomes and expectations. While the Geneva talks last month wrapped with an identical US-China statement, suggesting a degree of alignment, that accord quickly fell apart over US claims China reneged on a promise to release shipments of rare earths. Beijing says it always intended to keep in place a permit process, which American companies complained moved so slowly some factories were forced to pause production. The lack of a detailed read out from either side this time around has left much in doubt, including over what Beijing committed to doing on the export of niche metals used in everything from fighter jets to electric vehicles. Lutnick told CNBC on Wednesday that China was going to approve "all applications for magnets from United States companies right away' - a sweeping claim that appeared to leave plenty of room for disappointment. Chinese Commerce Ministry spokesman He Yadong pledged his country would "fully consider the reasonable needs and concerns of all countries in the civilian sector,' at a regular press briefing in Beijing on Thursday, adding that approval work was being strengthened. "The Chinese incentive is also to keep cards close to their chest, and not make a lot of proclamations about what they have or have not committed to,' said Arthur Kroeber, founding partner and head of research at Gavekal. "There is a lot of leeway for them within the whole export licensing regime.' One approach could be to restart enough export licences so commercial buyers aren't stymied, but not so much that firms can stockpile, thus blunting Beijing's future leverage, he added. Adding to the fuzziness, Trump declared on social media that China now faces a 55% charge, a number that appears to include levies introduced during his first presidency. It also combines a 10% baseline duty imposed by Trump and a 20% tax tied to fentanyl trafficking - an area where Beijing was seen as having room to negotiate if it stepped up scrutiny of its companies. Lutnick cast doubt on that, and raised questions about the nature of future negotiations, saying tariffs on China would "definitely' stick at their current level. That suggests a 90-day pause set to expire in August on Trump's blanket 145% rate is now irrelevant. Such a position also dilutes the incentive for Beijing to offer concessions in future trade talks, if tariffs can't budge. While China has felt the pain from US levies, with exports to the world's largest economy plunging 34% in May, Trump appears to be in the bigger hurry to get a deal. His administration is facing a self-imposed July 9 deadline to either strike pacts with dozens of trading partners or reimpose sweeping tariffs. In a sign of the Republican leader's growing impatience, he warned Wednesday that he will soon send letters to countries saying, "this is the deal, you can take it or leave it.' Exemplifying that willingness to keep things moving, Trump's team this week put export controls on the negotiating table - previously, such tools have been justified with national security concerns, and were largely off limits. - Bloomberg
