US-China Paris Trade Talks — Tariffs and Rare Earth
The US and China, accounting for 40% of the global economy, have commenced trade talks in Paris. The two negotiating cards—tariffs and rare earth supply—are not merely trade friction but represent the frontline of a structural conflict over technological hegemony, resource dominance, and alliance realignment, serving as a watershed moment that will determine the future direction of the world order.
── Understand in 3 points ─────────
- • On March 15, 2026, trade talks between high-ranking US and Chinese officials commenced in Paris, France.
- • President Trump's visit to China is scheduled for the near future, and these talks are positioned as groundwork for that visit.
- • The United States activated new tariff measures against Chinese products in February 2026.
── NOW PATTERN ─────────
The US and China are caught in an "escalation spiral" through the exchange of tariffs and rare earths, at a juncture where "path dependency," making policy reversals difficult due to past commitments, and "overreach of power," where both sides risk exhausting their strategic cards, intersect.
── Probability and Response ──────
• Base case 55% — Multiple rounds of talks are scheduled, item-specific tariff rate discussions are reported, Trump's visit to China is confirmed, and diplomatic pleasantries such as "constructive discussions" are issued by both sides.
• Bull case 20% — Optimistic statements from President Trump such as "a big deal is close" are made, China proposes expanding imports for some tariffed items, and reports emerge of partial easing of export controls related to rare earths.
• Bear case 25% — Reports of talks breaking down, increased military activity in the Taiwan Strait or South China Sea, China announcing new rare earth export restrictions, accelerated deliberation of additional sanctions bills in the US Congress, and reports of Trump's visit to China being postponed.
📡 THE SIGNAL — What Happened
Why it matters: The US and China, accounting for 40% of the global economy, have commenced trade talks in Paris. The two negotiating cards—tariffs and rare earth supply—are not merely trade friction but represent the frontline of a structural conflict over technological hegemony, resource dominance, and alliance realignment, serving as a watershed moment that will determine the future direction of the world order.
- Diplomacy — On March 15, 2026, trade talks between high-ranking US and Chinese officials commenced in Paris, France.
- Diplomacy — President Trump's visit to China is scheduled for the near future, and these talks are positioned as groundwork for that visit.
- Trade — The United States activated new tariff measures against Chinese products in February 2026.
- Resources — The stable supply of China's rare earths (rare earth elements) is one of the main topics.
- Geopolitics — The choice of Paris as the venue for the talks suggests a multipolar negotiation structure involving the EU (European Union).
- Industry — Rare earths are essential materials for advanced technology industries such as electric vehicles (EVs), semiconductors, and defense equipment.
- Economy — The trade volume between the US and China exceeds approximately $700 billion annually, making it the world's largest bilateral trade relationship.
- Politics — Since taking office in 2025, the Trump administration has progressively raised tariffs on China.
- Resources — China controls approximately 60-70% of the world's rare earth refining capacity and utilizes supply restrictions as a diplomatic card.
- Diplomacy — Since the latter half of 2025, the tit-for-tat exchange of semiconductor export controls and rare earth export restrictions has intensified between the US and China.
- Markets — Following the activation of new tariffs, volatility in the manufacturing and technology sectors has increased in both US and Chinese stock markets.
- Alliances — Allies such as Japan, South Korea, and Australia are also accelerating the diversification of rare earth procurement, aligning with the US supply chain restructuring strategy.
To understand why these US-China trade talks are necessary and why they are taking place in this format in Paris in March 2026, it is essential to survey the structural changes that have unfolded over the past decade.
US-China economic relations rapidly deepened following China's accession to the WTO in 2001. America's strategic calculation at the time was clear: an "engagement policy" aimed at integrating China into the international economic system to promote market opening and political liberalization. However, this premise began to fundamentally waver in the 2010s. While achieving economic growth, China strengthened its state capitalist model, enhancing industrial competitiveness through forced technology transfer, intellectual property infringement, and subsidies to state-owned enterprises.
A turning point came in 2018 with the activation of tariffs on China by the first Trump administration. Additional tariffs totaling $370 billion were imposed on Chinese products, and China retaliated with its own tariffs. This "tariff war" temporarily ceased with the "Phase One Agreement" in January 2020, but fundamental structural issues—technological hegemony, industrial subsidies, and asymmetric market access—remained unresolved.
The Biden administration (2021-2025) maintained tariffs while shifting the focus of its China policy to "de-risking." The advanced semiconductor export controls in October 2022 and the strengthening of investment screening for China in 2023 marked a turning point, placing economic security at the core of trade policy. The semiconductor regulations, in particular, directly constrained China's AI and military technology development, taking on the character of "technological containment" beyond mere trade friction.
The Trump administration, which reappeared in January 2025, maintained the previous administration's regulatory framework while intensifying its offensive. From late 2025 to early 2026, additional tariffs were successively activated on Chinese-made EVs, batteries, solar panels, steel, and aluminum. The new tariff measures in February 2026 are the latest chapter in this series of developments.
The emergence of rare earths as a central topic is underpinned by China's strategic counter-response. China has a precedent of restricting rare earth exports to Japan during the 2010 Senkaku Islands dispute, demonstrating its willingness and capability to use resources as diplomatic leverage. Since 2023, starting with export controls on gallium and germanium, China strengthened export controls on rare earth-related technologies in 2025. This is an asymmetric retaliation against US semiconductor regulations, sending the message: "If you stop our chips, we will stop our raw materials."
The choice of Paris as the venue is also significant. The selection of an EU member state capital, rather than traditional neutral grounds like Geneva or Singapore, suggests an intention to draw Europe into (or check) this negotiation structure. The EU is one of the largest trading partners for both the US and China, and the direction the EU leans will significantly influence the geoeconomic power balance. French President Macron's "strategic autonomy" seeks a third path that does not fully align with either the US or Chinese camps, but in reality, decoupling supply chains from US-China dependence is not easy.
The fact that President Trump's visit to China is pending means that these talks are not merely administrative-level negotiations but a political process designed to pre-engineer the outcomes of a summit meeting. President Trump needs to demonstrate results domestically as a "dealmaker," while President Xi Jinping needs to manage US pressure while maintaining domestic economic stability. While both sides have "motives for agreement," the cost of concessions is extremely high. A significant rollback of tariffs would appear to weaken the Trump administration's hardline stance, and an unconditional guarantee of rare earth supply would mean China giving up one of its few strategic cards.
These talks represent a facet of the fundamental conflict over the principles by which the 21st-century international order will be governed. From an era of free trade and interdependence to an era of economic security and strategic autonomy. In this transition process, tariffs and rare earths are not mere commodities but mirrors reflecting the structure of hegemony.
The delta: What qualitatively distinguishes these Paris talks from previous US-China trade negotiations is that traditional trade tools like tariffs and resource strategies like rare earths are being discussed face-to-face at the same table for the first time. This signifies an irreversible phase shift in US-China conflict from a "trade war" to an "economic security war," marking a structural turning point where the success or failure of negotiations will ripple across the entire global supply chain for semiconductors, EVs, and the defense industry.
🔍 BETWEEN THE LINES — What the Reports Aren't Saying
While official reports treat "tariffs and rare earths" in parallel, the underlying structure is more asymmetric. For the US, a stable supply of rare earths is a "security matter" concerning the very foundation of its defense industry and advanced technologies, possessing a qualitatively different urgency than tariff negotiations. Paris was chosen as the venue not only to project neutrality but also as a strategic move to explore potential collaboration with the EU's Critical Raw Materials Act. China's primary reason for agreeing to talks at this timing is the recognition that the rare earth card's shelf life is becoming apparent—with alternative projects in Australia, Canada, and Africa slated to begin supply in 2027-2028, there's a calculation to cash in the card while its negotiating power is at its peak "now."
NOW PATTERN
Escalation Spiral × Path Dependency × Overreach of Power
The US and China are caught in an "escalation spiral" through the exchange of tariffs and rare earths, at a juncture where "path dependency," making policy reversals difficult due to past commitments, and "overreach of power," where both sides risk exhausting their strategic cards, intersect.
Intersection of Dynamics
The three dynamics of "escalation spiral," "path dependency," and "overreach of power" are interconnected, forming a self-reinforcing structure. It is at this intersection that the inherent difficulties of the Paris talks, and simultaneously, the slight possibility of a breakthrough, exist.
The mechanism by which the escalation spiral deepens path dependency is clear. With each round of tariff retaliation, the number of domestic beneficiaries (protected industries, hawkish politicians, security communities) increases, expanding the network of stakeholders who resist policy "rollbacks." In the US, the steel industry lobby, and in China, state-owned rare earth enterprises, function as structural gravitational forces that "lock in" their respective governments' policies.
Concurrently, path dependency makes the overreach of power inevitable. To maintain past commitments, both sides are compelled to invest further resources. The US requires hundreds of billions of dollars in public and private investment for supply chain reconstruction, while China must continue large-scale state investment in its semiconductor industry for technological self-reliance. These investments represent a short-term economic burden, and that burden generates political pressure for further "results."
And the overreach of power accelerates the escalation spiral. When both sides feel the increasing strategic costs, the motivation to "make the other side pay first" intensifies, creating an incentive to resort to more aggressive measures. This resembles a "chicken game" structure, where escalation proceeds as both sides wait for the other's concession.
However, the intersection of these three dynamics paradoxically also creates a "window for agreement." When the costs of overreach of power become visible—US consumer price inflation, China's export slowdown—political leaders gain a motive to temporarily control the spiral. President Trump's planned visit to China aims to politically leverage this moment of "cost visualization," and the Paris talks are the groundwork for it. Nevertheless, due to the depth of path dependency, any agreement will inevitably be limited, likely remaining a "management" of structural conflict rather than a fundamental resolution.
📚 HISTORY OF PATTERNS
1930: Smoot-Hawley Tariff Act and the Collapse of World Trade
A chain of retaliatory tariffs reduced global trade volume by approximately 65%, exacerbating the Great Depression. A classic example of protectionism's "escalation spiral" spiraling out of control.
Structural similarity with the present: The tariff tit-for-tat harmed both sides, eventually leading to the establishment of multilateral frameworks like GATT/WTO, but that transition required the catastrophic cost of a world war.
1973: OPEC Oil Embargo and the Weaponization of Resources
Arab oil-producing nations used oil supply as diplomatic leverage. While highly effective in the short term, it accelerated the development of alternative energy and energy-saving technological innovation in the medium to long term.
Structural similarity with the present: The weaponization of resources is powerful in the short term, but in the long term, it promotes the development of alternatives, thereby diminishing its own effectiveness as a weapon—a classic pattern of "overreach of power."
2010: China's Rare Earth Export Restrictions on Japan
Over the Senkaku Islands dispute, China virtually halted rare earth exports to Japan. Japan suffered severe short-term damage but accelerated the development of recycling technologies and research into alternative materials.
Structural similarity with the present: The weaponization of rare earths has a precedent, and as a result, Japan reduced its dependence on China. However, even after more than 15 years, complete decoupling from China has not been achieved, demonstrating the depth of path dependency.
2018-2020: First US-China Trade War and Phase One Agreement
After an intensification of tariff retaliation, a limited agreement was reached to coincide with political timing (before the presidential election). However, structural issues remained "frozen" and unresolved.
Structural similarity with the present: Negotiations between the US and China tend to result in "management" rather than structural resolution. Agreements are linked to political calendars and have the characteristic of postponing fundamental conflicts.
2022: Russia-Ukraine War and the Weaponization of Natural Gas
Russia restricted natural gas supplies to Europe, using energy as geopolitical leverage. Europe responded by shifting to LNG and accelerating renewable energy, but faced a severe short-term energy crisis.
Structural similarity with the present: The geopolitical risk of resource dependence is real, and decoupling requires high costs and time. However, it was also demonstrated that a crisis can irreversibly accelerate the transformation of dependence structures.
Patterns Revealed by History
The lessons revealed by historical patterns can be summarized in three points. First, the weaponization of tariffs and resources self-reinforcingly deepens the "escalation spiral," but ultimately, the accumulation of costs pushes both sides back to the negotiating table. However, such "pushback" rarely leads to structural solutions, often resulting in temporary, managed agreements. Second, the weaponization of resources (oil, natural gas, rare earths) is powerful in the short term, but in the medium to long term, it accelerates the development of alternative supply sources and demand-side innovation, diminishing its effectiveness as a card. Just as the 1973 OPEC embargo spurred an energy-saving revolution and China's 2010 rare earth restrictions fostered Japan's recycling technology, the weaponization of resources has the character of "self-extinguishing leverage." Third, the power of path dependency is extremely strong, and building alternative supply chains requires a timeframe of 5 to 15 years. The fact that global rare earth refining remains concentrated in China even after more than 15 years since 2010 illustrates how deeply entrenched path dependency is. The current Paris talks are also an extension of these historical patterns. That is, "managed agreements" are possible, but "structural transformation" is distant, which is the most probable scenario.
🔮 NEXT SCENARIOS
The Paris talks will conclude with a limited "managed agreement" after several rounds of negotiations. Specifically, an agreement will be reached on tariff reductions for some items covered by the new tariffs activated in February 2026 (politically sensitive items such as agricultural products and consumer goods), and on setting supply quotas for some rare earth items (e.g., neodymium for permanent magnets). During President Trump's visit to China, a "joint statement" based on this agreement will be issued, allowing both sides to project "victory" domestically. However, core issues such as semiconductor export controls and export management of rare earth-related technologies will be postponed to a "continued discussions" framework, remaining unresolved. The market will evaluate this agreement as "as expected," and stock markets will react with a slight uptick but without a major trend reversal. Rare earth prices will remain high, and investment in building alternative supply chains will continue. US-China relations will solidify as "managed conflict," and the Trump administration, ahead of the 2026 midterm elections, will tout the agreement as an achievement while fundamentally maintaining its hardline stance on China. This agreement is structurally similar to the "Phase One Agreement" of 2018-2020, representing a repetition of the historical pattern of postponing fundamental conflicts.
Implications for Investment/Action: Multiple rounds of talks are scheduled, item-specific tariff rate discussions are reported, Trump's visit to China is confirmed, and diplomatic pleasantries such as "constructive discussions" are issued by both sides.
The Paris talks achieve a greater-than-expected breakthrough, and a framework for a comprehensive "Phase Two Agreement" is reached during Trump's visit to China. This is strongly supported by domestic political pressure in the US due to rising consumer prices and China's economic slowdown (signs of GDP growth falling below 4.5%). The agreement includes a significant rollback of tariffs activated in February 2026 (reductions on key items, though not all), a medium-to-long-term framework agreement on stable rare earth supply (setting an annual supply floor), and clarification of "red lines" in the technology sector (distinguishing between military and civilian uses). The market evaluates this as a major positive surprise, leading to significant gains in technology and materials stocks. The RMB also appreciates against the dollar. However, even in this optimistic scenario, structural conflicts are not resolved; the agreement is merely an "enhancement of management." The core of semiconductor regulations remains, and China's path to technological self-reliance does not change. Nevertheless, temporary control of escalation and improved market sentiment would be a significant positive for the global economy. This scenario's realization depends on a miraculous alignment of political timing, where President Trump strongly needs a "big deal" for the midterm elections, and President Xi prioritizes improving external relations for domestic economic stability.
Implications for Investment/Action: Optimistic statements from President Trump such as "a big deal is close" are made, China proposes expanding imports for some tariffed items, and reports emerge of partial easing of export controls related to rare earths.
The Paris talks collapse or conclude with virtually no results, leading to a further escalation of US-China conflict. Triggers for this scenario include external shocks during the talks—for example, heightened military tensions in the Taiwan Strait, China activating new rare earth export restrictions, or the US Congress passing additional anti-China sanctions bills. If the talks effectively stall, the Trump administration may respond with further tariff hikes (e.g., over 80% tariffs on Chinese high-tech products), and China may strengthen export controls on rare earth refining technologies. Trump's visit to China would be postponed or canceled, further intensifying the "New Cold War" character of US-China relations. Market impact would be severe, with a sharp decline in global manufacturing PMIs, significant corrections in technology stocks, and a surge in rare earth prices (NdPr oxide exceeding $100/kg) expected. Pressure on allies would also intensify, forcing Japan and South Korea to choose sides between the US and China. If this scenario prolongs, the global economy's transition to "fragmented supply chains" will accelerate, and the structural retreat of globalization will irreversibly advance. The EV battery and semiconductor industries, in particular, would be forced to significantly revise production plans due to disruptions in rare earth and advanced material supplies.
Implications for Investment/Action: Reports of talks breaking down, increased military activity in the Taiwan Strait or South China Sea, China announcing new rare earth export restrictions, accelerated deliberation of additional sanctions bills in the US Congress, and reports of Trump's visit to China being postponed.
Key Triggers to Watch
- Formal announcement of President Trump's visit to China schedule and agenda: Late March to Mid-April 2026
- Announcement of additional or eased rare earth export control measures by China: March to May 2026
- Publication of tariff review list by the Office of the United States Trade Representative (USTR): April to June 2026
- Announcement of US-China trade statistics for Q1 2026 (quantitative assessment of tariff impact): May 2026
- Confirmation of EU-China summit schedule and agenda setting (indicator of linkage with Paris talks): April to June 2026
🔄 TRACKING LOOP
Next Trigger: Formal announcement of President Trump's visit to China schedule (expected early April 2026) — once confirmed, the outcome level of the Paris talks will become clear, indicating whether an agreement or breakdown is likely.
Continuation of this pattern: Tracking: The Future of US-China Economic Security Negotiations — Next Milestones are Trump's Visit to China (scheduled April 2026) and USTR Tariff Review List Publication (April-June 2026)
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