Submission + - US Seen Trading Chips For Chinese Rare Earths (investors.com)
hackingbear writes: U.S.-China trade talks are continuing in London today with the focus on Beijing's export restrictions of rare earth magnets that threaten to hit the brakes on manufacturing of autos, high-tech and defense gear. U.S. President Trump authorized Treasury Secretary Scott Bessent and fellow U.S. negotiators to walk back recent U.S. moves to suspend exports of jet engines, chip-design software and ethane. However, some on Wall Street think Beijing is in position to demand a much broader reversal of chip export controls. It's "unrealistic," wrote Christopher Wood, global head of equity strategy at Jefferies, "for Washington to assume that China is going to ease up controls on rare earths if the U.S. does not do the same as regards exports of U.S. tech products." China views U.S. export controls, some of which were dated as far back as 1996, on chips and chip equipment "as the equivalent of a declaration of economic war against China, since it amounts to a deliberate effort to prevent the upgrading of the mainland economy." The S&P 500 is edging back toward its record high as markets see little doubt that President Trump will get a deal done, given the disastrous consequences for the economy if he doesn't. Earlier this month, several carmakers, both traditional and electric, are considering moving part of the manufacturing process to China in order to secure supplies of rare earth magnets which are used by the dozen in every vehicle. This could include building electric motors in Chinese factories or shipping American-made motors to China to have the magnets installed. "U.S. efforts to diversify rare earth supply may gather pace, but building capacity outside China will take years and remains both costly and difficult to execute," the UBS strategist wrote.
