China Morning Missive
Nothing like coming into the office first thing on a Monday morning to find news of SecTres Bessent saying that the rare earth issue “should hopefully be completed by Thanksgiving.” Wasn’t the entire idea of the Trump-Xi meeting to finalize the issue? And on that note, what is going on with TikTok? There’s another item which hasn’t been fully finalized.
Even though the current headlines a dominated by a growing conflict between China and Japan over comments made on Taiwan and there’s also the reporting of the Chinese economy under continued pressure, the main event remains the Battle of Two Titans, China v. America.
Honestly, someone in Washington needs to hire me to teach a class in China Negotiations 101. All of what is transpiring is a known quantity if you understand how it is the Chinese operate. When they have leverage (and they very much do), they press their advantage up until the real point of conflict.
I would also add that rare earths, while important, is a symptom of a far larger problem facing America. A problem known by the Beijing leadership and a problem which will continue to be leveraged.
The real issue is an acute dependency throughout America on the supply of all sorts of intermediate goods. No one in the States is talking about it and it is the same dynamic at play as with rare earths but goes to just about every single corner of American industry.
Intermediate goods are the critical inputs required across all industries to manufacture finished goods. So long as you are missing one or two small parts that go into a manufacturing process then you are unable to complete that process. This, again, is the primary issue with rare earths. They are a component, and intermediate good, required in a much larger manufacturing process. Without access then the process itself has zero value.
Again, this very dynamic carries across just about every industry. American manufactures remain dependent on a host of inputs, intermediate goods, sourced from China.
One perfect example of this would be drones. In fact, I would expect this to be one of the next major issues to arise between China and America. You’ll see all sorts of reporting on companies likes Anduril or Skydio. Both are tasked with building out America’s capacity to manufacture drones. Both, however, would have at least some degree of dependency on China for the sourcing of needed inputs. China, however, placed a global export control on critical parts for the entire drone industry. This move was made explicitly in response to the American government banning all domestic sale of DJI Technology products.
I must stress; this is just one example. There are hundreds of other American companies still at critical risk to China’s supply chain. Mitigating the risk will take years and Beijing negotiators are fully aware of the issue.
https://www.reuters.com/world/china/china-rare-earths-deal-will-hopefully-be-done-by-thanksgiving-bessent-says-2025-11-16/
