China Expects Balanced Trade Deal Amid Tariff Uncertainty-But Will Rare Earth Leverage Reshape the Outcome?

Highlights

• Prominent economist Li Daokui anticipates a mutually beneficial trade deal between the US and China after the 90-day tariff freeze.
• China leverages its critical role in global supply chains, particularly rare earths, to strengthen its negotiating position.
• Ongoing trade tensions remain complex, with debates about economic pragmatism versus industrial sovereignty.

According to China Daily reporters Zhou Lanxu and Wang Keju, prominent economist Li Daokui, dean of Tsinghua University’s Institute for Chinese Economic Practice and Thinking, believes the U.S. and China are poised to reach a “balanced and mutually beneficial” trade deal following the expiration of the 90-day tariff freeze on July 9. Speaking at the 2025 ZGC Forum in Beijing, Li predicted a dual-track U.S. tariff strategy: punitive measures against uncooperative nations and softer terms for strategic partners—like China.

Li emphasized that, given its critical role in global supply chains—especially in rare earths—China is now in a stronger position to “put forward its own demands” in trade negotiations. He voiced optimism that any forthcoming agreement would be more reasonable than past deals, providing mutual economic benefit.

REEx Insight:

This represents the official Chinese narrative: that cooperation with the U.S. is not only likely but desirable, with China’s strategic mineral leverage quietly acknowledged. However, in the U.S. and broader Western circles, perspectives differ. Critics argue that China’s domination of rare earth refining and midstream processing remains a systemic risk, rather than a strength to be leveraged in negotiations.

American trade hawks are also likely to view any deal that does not address subsidies, IP practices, or supply chain coercion as a superficial fix. As Washington’s trade policy turns more explicitly protectionist and security-oriented, the question is: Will rare earth dependencies force the West into compromise—or speed decoupling?

Some questions raised include whether rare earth access can be used as a direct bargaining chip—or as implicit leverage.

Additionally, how will the U.S. strike a balance between economic pragmatism and industrial sovereignty?

See “Economist: China, US may reach balanced trade deal (opens in a new tab),” by Zhou Lanxu and Wang Keju, China Daily, July 6, 2025