Trump's bravado has totally backfired. China has the President right where it wants him - for one devastating reason: DOMINIC LAWSON
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'Ladies and gentlemen, Britain is back on the world stage.’ This, preposterously, was how Sir Keir Starmer addressed European leaders at an event in London to mark his dismal deal with Brussels last month.
But today our capital really will be the stage on which global attention is focused: representatives of the governments of China and the US – including Donald Trump’s Treasury Secretary Scott Bessent – have flown in for negotiations designed to defuse the trade war between the world’s two mightiest economic powers.
This was started on prime time TV by Trump on April 2 (‘Liberation Day’) when he announced punitive tariffs on imports from China (and indeed about 180 other countries).
Later, he warned: ‘Do not retaliate, and you will be rewarded.’
But Beijing did indeed retaliate, and Trump, after escalating, backed down, to the extent of reducing tariffs on Chinese goods from 145 per cent to 30 per cent, pending negotiations on some sort of final deal. Which is what the meeting in London is designed to sort out.
This is the result of a 90-minute conversation between China’s President Xi Jinping and Trump last week, which the US President described on his Truth Social platform as ‘a very good phone call’ that ‘resulted in a very positive conclusion for both countries’.
The Chinese foreign ministry’s account was less ingratiating, pointing out that the call was initiated at Trump’s request.
These matters are always opaque, so I turned to a vastly experienced ex-Foreign Office hand – John Gerson – who served in Beijing for many years and acted as an adviser and interpreter for Margaret Thatcher during her visits to China. His analysis of the portents of this meeting in London was devastating, at least from the West’s point of view.
‘The US has allowed itself to be the supplicant right from the word go. There would not have been a telephone conversation unless Xi had first been given guarantees that he was going to get more or less what he needed.
‘And this is a step on the way to establishing a geopolitical environment in which Xi can pursue his aims, while the bull Trump goes charging about at a host of imaginary red-flag-waving matadors elsewhere.’
The most widely cited cause for Trump’s de-escalation of his onslaught on China was the fright taken by international bond markets: if the cost to the US of funding its colossal public debt soars, then economic meltdown comes to America, not China.
But there is a second reason for Trump’s more conciliatory tone, lying in the physical world rather than that of computer screen transactions. The most deadly part of China’s response was the weaponising of its dominance of the global supply of rare earth metals which are, among other applications, crucial to the tiny yet intensely powerful magnets in the manufacture of modern motor cars – and not just electric vehicles.
As one expert on this matter explains: ‘They are not only essential for many kinds of electric motors used in the manufacture of EVs, drones, robots, missiles and gasoline-powered cars.
‘These metals are also required for the manufacture of jet engines, lasers, car headlights and certain spark plugs and capacitators which are electrical components of the computer chips that power artificial intelligence servers and smartphones.’ Important doesn’t begin to encompass it.
Anyway, Beijing’s retaliation was not just to whack up its own tariffs on US goods to 125 per cent: it blocked the export of such magnets containing the rare earth elements.
A month later, a group of the biggest vehicle manufacturers in the US wrote to Trump to say they would soon have to cut back production and even close plants – unless the Chinese began to resupply the vital materials.
Far from Trump’s ‘Liberation Day’ achieving its declared purpose of getting more manufacturing of products purchased by Americans back to the US, and thus providing ‘manly’ jobs for what he would see as his core voters, it threatened to have the opposite effect: closing down American factories.
On the very day that letter from General Motors (among others) was received in the White House, Trump wrote on Truth Social that he was prepared to play nice with China and slashed the tariff rate.
In turn, the Chinese said they would rescind the rare earth export ban: but there still appears to be some sort of go-slow in terms of government approving individual shipments. While, last week, according to the Financial Times, ‘Beijing has agreed to fast-track approvals for rare earth shipments for some European companies’. China is, obviously, attempting a divide-and-rule policy in respect of the EU and the US.
This, too, is something Trump has foolishly facilitated. As I wrote in the Mail two months ago: ‘If Trump were strategic in his desire to isolate China, he would not simultaneously pick a fight with the EU.
‘When Ursula von der Leyen came in as president of the European Commission, she stated her intention to reduce the risks of dependence on China. But the effect of Trump’s imposition of 25 per cent tariffs on cars and steel from the EU’ – since raised to 50 per cent – ‘is to weaken the hand of European leaders who favour such a realignment.’
It hardly helped that Trump’s understandable desire to source rare metals from outside China had led him to threaten annexation of Greenland, the territory of an EU nation: Denmark.
As things stand, the International Energy Agency suggests that evenby 2035, China will still be responsible for 85 per cent of the production of refined rare earth elements.
The American military historian Phillips O’Brien wrote two months ago: ‘One would have thought that the USA would have, in preparation for Trump’s tariff wars, at least taken the basic precautionary step of stockpiling such metals – or exploring alternative sources – but that seems not to have been the case. If so, it has been a catastrophic oversight.’
In fact, the military aspect of China’s dominance of rare metals has been displayed with extraordinary impact in Russia’s war on Ukraine.
The drones that Moscow has used to terrorise the Ukrainian population – even with a disgusting ‘human safari’ against civilians in Kherson – rely hugely on Chinese supplies of rare earth magnets, at the heart of the electric motors and lithium-ion batteries powering them.
According to the Royal United Services Institute, such drones have also accounted for around 70 per cent of the destruction that Ukraine has managed to wreak on Russian equipment.
This was seen most spectacularly a week ago when, in a brilliantly conceived and executed operation, Kyiv managed to smuggle drones thousands of miles into Russian territory, there to be unleashed on Putin’s air bases, knocking out an estimated 15 per cent of the fleet used to bombard Ukrainian cities.
While the Chinese have denied supplying these essential materials for Russia’s drones, this is believed by no one.
And when it is was reported last week that the electric motors and lithium-ion batteries used in Ukraine’s drone attack on Russian airfields were ‘sourced online’, that almost certainly can only mean ‘in China’.
So when it is asked, who is winning the war, Russia or Ukraine, the answer is: China.
The same goes for the trade war that Donald Trump started.
