China’s Trade Talks: National Security Controls as Bargaining Chips
The latest round of U.S.–China diplomacy has fused trade policy with technology security in ways that few would have imagined five years ago. In place of clean lines between commercial issues and military concerns, negotiators are now explicitly weighing tariffs, rare earths, and export restrictions together. In this environment, national security controls are no longer a separate track; national security controls are the currency on the table.
What actually shifted in the talks
Reports following late-October leader-level engagement describe a narrow truce: Beijing has paused the next phase of rare earths curbs while Washington signals flexibility elsewhere, even as it insists core guardrails will remain. China’s agreement to delay new rare earth export controls—after months of incremental tightening—removed an immediate supply shock risk for manufacturers of magnets, batteries, and electronics. Yet earlier restrictions remain, and the pause is time-boxed, underscoring how national security controls function as leverage rather than a permanent solution. Reuters+1
At the same time, the United States is still enforcing and refining the semiconductor export regime first unveiled in October 2022 and expanded in 2023 and 2024, with additional clarifications through late 2024 and 2025. These measures target advanced computing chips, manufacturing tools, supercomputing end uses, and problematic actors, reflecting the administration’s “small yard, high fence” philosophy. The fence is real: license scopes have widened, waivers have narrowed, and enforcement has increased. This is the backdrop against which national security controls entered center stage in trade talks. trade.gov+2bis.gov+2
Tariffs, truce, and the rare earths reality
Tariffs remain in flux after successive rounds from different administrations. In 2024, the United States raised targeted tariffs on EVs, solar components, batteries, and related inputs; a four-year review preserved most Section 301 duties, while certain exclusions were extended only temporarily into 2025. Analysts expected further adjustments in 2025 as politics and supply chains evolved. With a partial détente on rare earths now in play, both sides have more room to maneuver on the tariff mix. But none of that changes the reality that U.S. import dependence for key minerals is still substantial, which is precisely why national security controls show up as bargaining chips. War on the Rocks+2china-briefing.com+2
Rare earths illustrate the strategic bind. China accounts for a dominant share of global production and processing, while U.S. domestic output and refining capacity remain constrained despite recent investment. New research this fall noted China’s outsized extraction volumes compared with the United States and Europe, and warned that even temporary export licensing regimes can ripple through supply chains. The current pause reduces near-term pressure, but the structural dependency persists, keeping national security controls in the conversation. cepa.org+1
Where export controls bite—and where they backfire
Semiconductor restrictions are designed to slow China’s access to top-tier AI chips, tools, and capabilities that could enhance military power. Official testimony and analysis suggest the controls have constrained volume and performance at key Chinese firms, even as those firms pour billions into domestic substitutes. Other assessments argue that some measures have had unintended consequences, spurring indigenous alternatives and reducing U.S. companies’ China sales. The debate underscores how national security controls can cut both ways, strengthening negotiating leverage while imposing costs and inviting retaliation. Reuters+2csis.org+2
In September, Washington revoked a fast-track license framework that had eased shipments to certain foreign-owned fabs in China, signaling that even mature-node equipment would face tighter scrutiny. This fits a pattern: calibrate, test market responses, then tighten if channels appear to undermine policy goals. That iterative dynamic makes national security controls central to any trade dialogue, because each adjustment recalibrates who has leverage and where. Reuters
The bargaining logic: why controls became chips
For years, U.S. trade negotiators tried to firewall economic talks from security measures, treating export controls as an independent tool. That line has blurred as both sides use supply choke points to shape the other’s choices. When Beijing applies export license regimes to rare earths and battery inputs, it is not only signaling displeasure with chip curbs; it is also testing how far national security controls can be traded for tariff relief or market access. Conversely, when Washington tweaks licenses, tightens enforcement, or offers case-by-case relief, it is communicating that national security controls are conditional on behavior, not fixed forever. mayerbrown.com+1
This bargaining logic is appearing alongside tariff recalibrations. Independent trackers point out that recent U.S. tariff waves cover a modest share of total imports in some categories, limiting immediate price effects but carrying significant signaling value. That signal—combined with the stick of export restrictions—explains why national security controls are now a headline item in negotiation summaries rather than an afterthought. Council on Foreign Relations
What it means for U.S. strategy
Strategically, the United States is attempting to square three objectives. It wants to defend cutting-edge technology advantages, diversify critical mineral supply chains, and avoid price spikes that could alienate allies or consumers. The “small yard, high fence” mantra recognizes that national security controls should be precise, not sprawling, but precision is hard when civilian and military technologies overlap. As long as the overlap endures, national security controls will be the most salient instrument in the policy mix. Texas National Security Review
There is also an alliance dimension. European and Asian partners worry about being whipsawed by sudden export licensing changes on rare earths and magnets that they need for industry. The United States thus faces pressure to coordinate more transparently, sharing intelligence on evasion and timelines for regulatory shifts. Absent that, even well-calibrated national security controls can look arbitrary to friends, complicating collective response to coercive tactics. German Marshall Fund
What it means for businesses
For firms importing finished goods or upstream inputs, the headline truce offers a breather but not certainty. Procurement teams should assume that license regimes can tighten again with little notice and that tariff status could change on short cycles tied to negotiations. The practical response is to map exposure beyond first-tier suppliers, evaluate substitutes for magnet and battery materials, and invest in compliance systems that can adapt as national security controls shift. For semiconductor-adjacent companies, the lesson is similar: today’s permit may not be tomorrow’s permit. mayerbrown.com+1
Some companies will welcome selective relief if it restores access to Chinese demand. Others fear that revenue-sharing arrangements or conditional licenses could normalize a pay-to-play approach, eroding policy credibility and inviting legal challenges. Either way, the business takeaway is that national security controls are now integral to market planning, not a narrow legal specialty handled after the fact. theguardian.com
The politics of mixing trade and tech security
Blending trade and technology security also has domestic political costs. When the United States loosens a restriction to secure a separate concession, critics warn of “trading away” security. When it tightens controls to signal resolve, opponents warn of higher costs and retaliation. That political push-pull is why national security controls have become bargaining chips: they are visible, fast-acting, and symbolically powerful in both capitals.
Policy research communities are divided on efficacy. Some scholars argue the chip rules are slowing China where it matters most and buying time for U.S. and allied innovation. Others warn that blanket constraints can accelerate self-sufficiency in China and divert sales to competitors, weakening the very firms Washington seeks to protect. Those disagreements will shape how far the United States is willing to move national security controls in future tranches of negotiation. csis.org+1
What to watch in the next phase
Three signposts will reveal whether the current pause becomes a pattern. First, look for concrete timetables on China’s rare earth licensing regimes; a rolling series of short deferrals would suggest continued leverage-seeking. Second, track Commerce Department actions around validated end-users, temporary waivers, and end-use definitions; frequent fine-tuning means national security controls remain an active bargaining domain. Third, watch for any coordinated allied announcements on minerals and advanced manufacturing that could reduce single-point-of-failure risks and make national security controls less negotiable over time. Reuters+2Reuters+2
Bottom line
Trade and technology are inseparable in today’s U.S.–China relationship. A narrow thaw on rare earths buys time, but it does not change structural dependencies or erase the strategic contest in advanced computing. In that contest, national security controls are both shield and signal. For now, national security controls will keep shaping tariffs, licenses, and supply chains. And unless diversification accelerates, national security controls will remain the primary chips both sides bring to the table.
Further Reading
Reuters explains the one-year pause on China’s latest rare earths export controls and why earlier limits remain in place, framing the deal as a reprieve rather than a rollback. Reuters
Bloomberg details the depth of U.S. dependence on Chinese rare earths and the strategic vulnerability that results, providing context for the current bargaining. bloomberg.com
The U.S. Commerce Department’s country commercial guide summarizes the evolving U.S. rules targeting advanced computing, chipmaking tools, and sensitive end uses. trade.gov
The Congressional Research Service’s brief catalogs trends in U.S. exports of semiconductor manufacturing equipment to China and the tightening control landscape. Congress.gov
CSIS analyzes the limits and trade-offs of chip export controls and how allies are converging on comparable approaches. csis.org
The Atlantic Council offers expert reactions on how leader-level diplomacy affects trade, technology, and security linkages. Atlantic Council
CFR reviews the scope and likely impact of the 2024 tariff increases, clarifying what share of imports is actually affected. Council on Foreign Relations
GMF describes how Europe and Asia are absorbing the shock of China’s broader rare earth and magnet licensing regimes and why coordination matters. German Marshall Fund
Dentons outlines 2025 tariff declarations that heightened cross-border tension and fed into subsequent negotiations. dentons.com
BIS press updates trace the enforcement cadence, including efforts to close loopholes involving foreign-owned fabs in China. bis.gov
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