As China's Li Chengang Heads to US for Talks, Trump Threatens 200% Tariff on Rare-Earth Magnets

TradingKey - According to reports, Chinese trade representative Li Chenggang will visit the U.S. this week for a new round of high-level trade talks, marking the fourth meeting between the two sides this year and the first to be held in Washington.

Although U.S. government spokespersons emphasized that this visit is "not part of formal bilateral negotiations," insiders revealed that both sides intend to use this opportunity to explore establishing a regular dialogue mechanism based on the current tariff truce (extended until early November), aiming to inject stability into the persistently tense bilateral trade relationship.

The talks come amid escalating tensions over rare earth magnet supply in the U.S.-China trade friction. U.S. President Trump issued a strong threat during his meeting with South Korean President Lee Jae-myung on Monday, stating that China must export rare earth magnets to the U.S., or else the U.S. would impose a 200% tariff on them.

He further threatened that the U.S. is pressuring China by restricting Boeing aircraft parts supply: "They (China) have 200 aircraft that cannot fly because we are not providing them with Boeing parts, and the reason is they are not providing magnets."

Boeing is currently negotiating a deal to sell up to 500 aircraft to China, and Bloomberg previously reported that aviation orders could serve as an "important bargaining chip" in the U.S.-China trade agreement. However, Trump's direct linkage of aircraft parts to rare earth supply undoubtedly increases the complexity of negotiations.

Earlier this month, Trump also called on China to "significantly increase purchases of U.S. soybeans," but has yet to receive a clear response from China.

Facing U.S. pressure, China's negotiation demands are clear, insiders revealed. China will continue to push for the U.S. to cancel the 20% tariff on fentanyl-related products and further relax export controls on Chinese technology companies.

The U.S. Department of Commerce decided in July to lift the ban on Nvidia's H20 chip sales to China, but this decision has sparked controversy in Washington—some analysts argue that "instrumentalizing export controls creates a dangerous precedent" that could harm U.S. long-term strategic security in the technology sector.

Although Trump mentioned in his Monday statement that he "may visit China this year to establish good relations," sending a certain signal of easing tensions, the fundamental disagreements between the two sides on issues such as rare earth supply, tariff barriers, and technology controls remain deep.