China's Xi Jinping Leverages Rare Earths Against US Export Controls and Tariffs

China's Strategic Leverage Against US Policies

• 💡 China's primary objective has shifted from reducing tariffs to countering US export controls, which are seen as more damaging.
• ⚡ By leveraging its chokehold on rare earth minerals and magnets, China compelled the US administration to roll back export controls and lower tariffs, securing two key wins for Xi Jinping.

China's Ideal Trade Relationship with the US

• 🎯 China's ideal scenario involves maximizing exports and importing advanced technology across all sectors.
• 📉 While not fully achieved, China is nearing this ideal, with Xi Jinping feeling little pressure to make further concessions or large purchase pledges like Japan and Europe.
• 🗣️ China has demonstrated significant leverage, indicating they do not need to comply with US demands if they choose not to.

Beijing's Guidance on Nvidia Processors

• ⚠️ Beijing is urging local companies, especially for government-related purposes, to avoid using Nvidia's H20 processors.
• 🚫 This guidance is not an outright ban but discourages the use of these chips for government or national security work.
• 📈 Chinese AI chip designers like Cambricon Technologies Corp. saw significant stock surges following this news.

Challenges for US Chipmakers in China

• 🤝 Nvidia and AMD secured US approval to sell lower-end AI chips to China, with a controversial condition of a 15% revenue cut for the US government.
• 📉 However, Chinese customers face pressure from Beijing to purchase domestic chips instead.
• ❓ Beijing has inquired about companies' reasons for choosing Nvidia chips over local alternatives and any security concerns.

BRICS and Coordinated Response to US Tariffs

• 🌐 Brazil and China, along with other BRICS nations, have expressed shared views on multilateralism and criticized US unilateralism.
• 🚧 A more integrated and coordinated response to US tariffs among BRICS nations is hindered by diverse membership and differing impacts of tariffs on member states.
• 🇨🇳 China, possessing significant leverage, does not heavily rely on the BRICS bloc for its own national interests and is unlikely to compromise these interests to expand the bloc's influence.