Lutnick: “We Are Not Giving China Our Best Chips,” Concedes That China Has Refused To Budge On The Issue Of Fentanyl Precursors

Details surrounding the broad-based framework agreement reached between the US and China in London on Tuesday are finally flooding in today, indicating some concessions to China on the stranglehold around silicon chips and a moderation in the US stance towards Chinese students in return for processed rare earths and magnets from China.

We had noted towards the end of May that China's restrictions on the export of processed rare earths and magnets were creating a sizable disruption for the US auto sector in particular, with some auto plants reportedly on the cusp of reducing or entirely halting their output.

For the benefit of those who might not be aware, rare earth metals are used in a wide range of industries, including in the production of magnets for electric motors.

Over the past few decades, China has built a global monopoly on the supply of processed rare earth metals. While the US certainly has copious deposits of raw rare earth metals, processing them requires an intricate interplay of massive funding, energy, infrastructure, and vertically integrated supply chain partners, necessitating a concerted, multi-year effort.

In the run-up to the US-China meeting in London this week, the US had effectively banned the use of Huawei chips anywhere outside China, restricted American chip design companies from selling their services and software to Chinese entities, threatened to revoke the visas of Chinese students, especially those with ties to the CCP, and suspended certain export licenses that allowed US companies to supply engine parts and related technology to China's state-owned aircraft manufacturer, COMAC.

Meanwhile, China persisted in slow-walking export licenses for badly-needed processed rare earths, precipitating another mutual détente this week.

To wit, as per the comments by President Trump and US Commerce Secretary Lutnick today, the US will maintain a 55 percent tariff on all Chinese imports while China will retain a 10 percent levy on American goods, as per the framework agreement reached in London.

Do note that after the US-China meeting in Geneva on the 10th and 11th of May, both sides had agreed to reduce their import tariffs on each other's goods by 115 percent for 90 days. Subsequently, China had slashed its tariffs on US imports from 125 percent to 10 percent, while the US had temporarily reduced its own levies on Chinese imports from 145 percent to 30 percent. De minimus imports from China (worth under $800) remained subject to a 54 percent levy in the US.

Critically, Lutnick said on CNBC just a short while back:

"We are not going to give China our best chips."

This comes as Kevin Hassett, the Director of the National Economic Council (NEC), recently implied that the Trump administration might be open to easing some China-specific chip export controls as part of efforts to reach a broader trade deal. Nonetheless, Hassett quickly shot down the possibility of easing existing restrictions on NVIDIA's China-geared GPU, the H20.

Coming back, it seems that China has relented on its stranglehold on processed rare earths in return for American student visas for Chinese students.

However, as per a report by the Wall Street Journal, China is easing its export restrictions on rare earth metals only for six months, setting the stage for tensions to flare up again towards the end of the year.

According to Lutnick, China will begin exporting rare earth metals to the US as soon as the American counter-measures imposed in recent days are removed. Of course, Chinese President Xi still has to approve this framework agreement.

Do note that China has refused to budge on the issue of fentanyl precursors though, with the Chinese side declaring point-blank that the issue was "not on the table."

As a refresher, China is a major global supplier of ingredients that are used to make the synthetic opioid drug fentanyl, which is around 50 times more potent than heroin as an analgesic.

About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.

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