The US-led “Quadrilateral Rare Earth Alliance” behind the scenes: Trump administration softens stance toward China

Following the signing of the Memorandum of Understanding between China and the United States, the United States began resuming exports of ethane to China. What signal does this send? Meanwhile, the Rare Earth Alliance was established. What are the two critical issues it faces?

Following the China-U.S. negotiations in London, both sides reached a framework agreement. Recently, Trump publicly announced that China and the U.S. had signed a memorandum of understanding, effectively putting the trade war on hold. What caught everyone off guard was that shortly after the signing of the ceasefire agreement, the U.S. lifted its export restrictions on ethane to China, with eight large tankers already en route to China.

This incident demonstrates that both China and the US are actively fulfilling the terms of the agreement they have reached. Moreover, to a certain extent, it once again shows that China's rare earth export policy has made the US dare not act hypocritically toward China as it did before. It is important to note that after the US-China Geneva negotiations, although both sides reached a certain consensus, the US did not take proactive action but instead continued to suppress China in various areas. It is clear that the United States sought to use this approach to pressure China into relaxing its restrictions on rare earth exports. However, under the circumstances where the United States was fabricating excuses and continuously suppressing China, China found no justification to export rare earths to the United States. Therefore, realizing that such tactics would not intimidate China, Trump could only call for a second round of negotiations, in which rare earths became the primary issue on the U.S. agenda for negotiations with China. As it turned out, Trump learned from the lessons of the first round of negotiations and began to adjust his stance toward China after the second round. For example, on the issue of Chinese students studying in the U.S., Trump explicitly stated that he welcomed Chinese students to come and study; additionally, after signing the memorandum of understanding, the U.S. lifted restrictions on exports of ethane and semiconductor products to China. In response, China also eased export permits for the U.S.

However, in the high-end chip sector, the US has not eased its export restrictions on China, and China has not relaxed its export controls on rare earths for military use to the US. This means that negotiations between China and the US will continue in the future. It will likely take a long time for China and the US to completely eliminate trade barriers.

It is worth noting that when the US began exporting ethane to China, four countries led by the US formed a united front and established a rare earth alliance. These four countries are the United States, Japan, Australia, and India. It is evident that these four countries are identical to the member states of the Quadrilateral Security Dialogue mechanism. In other words, the scope of the United States' newly formed “circle” has expanded. In addition to the previous strategic containment of China, reducing dependence on Chinese rare earths has also become one of their primary objectives. However, this circle of four countries faces two critical issues.

First, there are rare earth reserves available for mining, but what is lacking is the technology for further processing of rare earths. Here, we will use India and Japan as examples. Recently, India and Japan have both announced plans to increase their rare earth mining efforts. It is important to note that India holds the world's third-largest rare earth reserves, so increasing production is certainly achievable. However, the issue lies in the lack of technology required to process the mined rare earths into finished products suitable for export. Therefore, while India's rhetoric is strong, it will take considerable time for these plans to materialize. Japan faces a similar situation, and its path to increasing rare earth production will be even more challenging. Japan has announced plans to mine rare earths from the seabed, which means it will incur higher costs from the outset. If it proceeds with secondary processing, the associated costs would be unaffordable for importing nations like the US. As for the US, authoritative institutions have predicted that it would take at least a decade for the US to reduce its reliance on Chinese rare earths. The so-called rare earth alliance is merely a group of countries using rare earths as a pretext to continue implementing a strategy to contain China.

Second, this circle is filled with uncertainties. The biggest uncertainty is India. Among the four countries of the United States, Japan, Australia, and India, the United States, Japan, and Australia are allies, while India is the only one excluded. Given India's modus operandi, it is entirely focused on using this alliance to maximize its own interests. From the Russia-Ukraine conflict to the present, India's behavior has been a textbook example of “fence-sitting.” In the Russia-Ukraine conflict, India has exploited its neutral stance to benefit from both sides. In its dealings with China, India has been causing trouble within the BRICS framework while simultaneously seeking to improve relations with China. Now, India has joined the so-called rare earth alliance. This undoubtedly provides Modi with a golden opportunity to blackmail Trump.

However, after the establishment of the “Four-Party Rare Earth Alliance,” the Trump administration began to soften its stance toward China. In addition to resuming exports of ethane to China, the United States recently lifted restrictions on the export of chip design software to China. These developments indicate that as long as China does not completely lift its restrictions on rare earth exports, the United States will dare not arbitrarily block China, and the schemes of certain countries seeking to weaken China through the United States are bound to fail.