Balance of Power

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It’s been a very good week for President Xi Jinping.

A call with Donald Trump — which the Chinese side stressed was at the American’s behest — turns out to have paid off. After more than 20 hours of discussions cobbled together at short notice in London, negotiators from both sides succeeded in getting their earlier Geneva truce back on track.

For Beijing, it was a reminder of just how much leverage the nation’s dominance in rare earths is worth when it comes to negotiating trade deals, and not just with the US. Exports of rare-earth magnets are critical all over the world for things like cars, defense and robotics.

It’s unlikely to be the last time that China chooses to weaponize its advantage.

In exchange for what US officials say is a promise to speed up shipments of these materials, Washington assented to put export controls on the table by agreeing to roll back some measures.

A rare-earth mine in Inner Mongolia, China. Photographer: Bert van Dijk/Getty Images

Though curbs on the most advanced chips remain in place, this marks a uncommon departure from the US’s usual stance on these type of restrictions — an issue repeatedly cited by Chinese officials as holding back the country’s technological advance.

Just as China was showing off its hold over a key pain point in supply chains, Trump signaled his “America First” agenda may yield another win for Beijing.

The Pentagon launched a review of the Biden-era Aukus pact to develop nuclear-powered submarines with the UK and Australia, a key plank of defense in the Pacific against China’s increasingly expansive naval threat.

It’s a reminder that the US is no longer a reliable partner even for its long-time allies, just as China is getting ready to flex its advantages over global trade. — Rebecca Choong Wilkins

Xi and Trump at a Group of 20 summit in 2018. Photographer: Kyodo News/Getty Images

Global Must Reads

US Commerce Secretary Howard Lutnick poured cold water on European Union hopes for a swift trade deal, saying an accord with the 27-nation bloc is likely to be the last completed as the administration prioritizes agreements elsewhere. Trump, meanwhile, said he intends to send letters to commercial partners in the next one to two weeks setting unilateral levies, ahead of a July 9 US deadline to reimpose higher duties on dozens of economies.

The US ordered some staff to depart its embassy in Baghdad and authorized families of military-service members to leave the region after Iran threatened to strike American bases if it’s attacked. Iran said it would build a new uranium-enrichment center in response to a decision by the United Nations atomic watchdog to censure the Islamic Republic over its nuclear program.

WATCH: Stuart Livingstone-Wallace discusses the US State Department announcement on Bloomberg TV.

The UK’s ruling Labour Party has repeatedly stressed the need for fiscal discipline since coming to power last summer. That tone shifted yesterday as Chancellor of the Exchequer Rachel Reeves announced major investments in defense, transport and energy in areas outside London in an attempt to head off an electoral threat posed by Trump-friendly Nigel Farage’s Reform UK.

Protests over immigration raids that began in Los Angeles continued to spread across the US as Trump escalated his crackdown by unleashing new federal powers. LA remained the epicenter of the demonstrations, which have triggered roughly 600 arrests since the weekend and led to clashes with law enforcement.

Protesters in front of California National Guard soldiers and LAPD officers in Los Angeles on Tuesday. Photographer: Mario Tama/Getty Images

Czech President Petr Pavel urged the US to give European nations more time and realistic goals to assume additional responsibility for the continent’s security. Trump is right to demand that Europe significantly increase defense spending, but it would take years to replace some protections provided by Washington, Pavel, a former top NATO general, told Bloomberg TV ahead of the military alliance’s summit in The Hague this month.

The EU reached a political agreement with the UK on post-Brexit border arrangements for Gibraltar following talks yesterday on the status of the self-governing British territory near the southern tip of Spain.

The Rock of Gibraltar. Photographer: Cristina Quicler/AFP/Getty Images

Israeli Prime Minister Benjamin Netanyahu’s government survived an attempt by opposition parties to dissolve parliament today, as tensions spiked over Iran’s nuclear program.

South Africa’s National Assembly approved the Treasury’s fiscal framework, bringing the adoption of the annual budget a step closer after months of wrangling over tax increases.

The US Treasury is considering changing rules to revoke tax-exempt status for colleges that consider race in student admissions, scholarships and other areas — potentially threatening the financial stability of hundreds of institutions.

On the new episode of Trumponomics, host Stephanie Flanders, Bloomberg’s head of government and economics, leads a panel from Bloomberg Hong Kong Invest. They discuss the status of Washington’s trade war negotiations with Beijing, and why Xi still has the upper hand. Listen on Apple, Spotify, or wherever you get your podcasts.

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Chart of the Day

Japan’s dominant auto industry, the country’s largest source of exports and a key provider of jobs, faces a monumental threat from Trump’s tariffs of 25% now in place on cars and auto parts. As this piece shows, Japan’s major automakers — including Toyota, Honda, Mazda and Subaru — are bracing for a collective hit of more than $19 billion this fiscal year alone.

And Finally

Bulgaria’s government has hailed the nation joining the euro as another step toward deeper integration in the EU. A growing swathe of Bulgarians aren’t convinced. The country has a long history of hardship and per-capita output is still two-thirds of the EU average after almost two decades of membership. Yet for millions of Bulgarians who lived through bank failures, economic crises and the painful transition of the 1990s, their currency — the lev — is a symbol of stability.

A line at a currency-exchange office in Sofia on June 4. Photographer: Nikolay Doychinov/AFP/Getty Images

Global Must Reads

Chart of the Day

And Finally

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