US Tightens Export Controls on China Yet Seeks Rare Earth Cooperation? The Madrid Consultations Are Shrouded in Mystery

On Sunday, September 14th, the economic and trade delegations of China and the United States held a new round of consultations in Madrid, the capital of Spain. When the Chinese delegation arrived at the Ministry of Foreign Affairs of Spain, the magnificent Palacio de Santa Cruz, the US Treasury Secretary Scott Bessent and Trade Representative Jamison Greer had already arrived. This palace with a strong Baroque style was supposed to be a stage for friendly exchanges between the two sides, but the sudden move taken by the US side before the talks cast a shadow over the negotiations.

Just two days before the talks, the US Department of Commerce unexpectedly added 23 Chinese enterprises and institutions to its control list, involving key areas such as semiconductors, integrated circuits, and biotechnology. This heavy blow not only poses a huge challenge for Chinese enterprises but also severely undermines the harmonious atmosphere before the negotiations. The Ministry of Commerce of China immediately responded strongly, pointing out the crux of the matter in a statement on September 13: What is the intention of the US side at a time when China and the US are about to hold economic and trade talks? On the same evening, China announced an anti-dumping investigation into analog chips imported from the US, demonstrating its firm stance in safeguarding national interests. Analysts pointed out that it was not accidental for the US to choose to launch a challenge before the negotiations. This is not only to gain more leverage at the negotiation table but also exposes anxiety about China's technological rise. Especially in the semiconductor field, China's breakthroughs in recent years have made the US feel that its technological advantages are threatened, so it tries to contain China's development through sanctions. Looking back over the past six months, the Chinese and US economic and trade teams have held three rounds of high-level dialogues in Geneva, London, and Stockholm. Among them, the Geneva talks achieved the most significant results, with the US side cancelling 91% of the additional tariffs and the Chinese side making corresponding concessions, creating favorable conditions for subsequent negotiations. The London talks focused on market access issues, while the Stockholm talks agreed to extend the trade truce period. These progresses had once raised expectations for the improvement of economic and trade relations between the two countries. However, the current situation is vastly different. Data shows that China's foreign trade grew by 5.9% overall in the first eight months of 2025, but the trade volume between China and the US plummeted by 13%, and the trend of decoupling is becoming increasingly evident. What is more challenging is that the US is caught in a dilemma on the issue of tariffs: canceling tariffs would affect its political credibility, while maintaining tariffs cannot improve the trade deficit. Especially on the issue of tariffs on fentanyl products, the US is in a dilemma, while also trying to woo the European Union, Mexico, and other countries to jointly pressure China. Technology control has become another major controversial focus. The US, citing national security reasons, has continuously tightened export restrictions on high-tech products such as chips from China. In May 2025, the US further banned the use of Huawei Ascend chips and other advanced computing products from China, which seriously disrupted the global semiconductor industry chain.

However, there is still room for cooperation between the two sides in the field of supply chains. The United States hopes to establish a joint procurement mechanism for rare earths with China, while China looks forward to the United States relaxing its restrictions on new energy vehicles. Reaching a consensus on this will be conducive to the stability of the global supply chain. It is worth noting that during this round of talks, China demonstrated a more open and confident attitude, taking the initiative to disclose the details of the negotiations and choosing to hold them in Spain, a neutral country, to avoid the psychological impact of home advantage. If the negotiations achieve a breakthrough, American consumers will benefit from reduced tariff burdens, and Chinese enterprises will also enjoy a fairer competitive environment. Conversely, if the negotiations fail, the risk of economic decoupling between the two countries will further intensify, bringing more uncertainty to global economic and trade.