In a high-stakes meeting that has reverberated across global supply chains, Donald Trump and Xi Jinping reached an agreement whereby China will maintain exports of rare-earth elements for one year under a new framework, with the U.S. President declaring that the matter is “settled” for now. The deal emerged shortly after the two leaders’ face-to-face discussions in Busan, South Korea, and signals a tactical pause in one of the most strategically sensitive arenas of the U.S.–China economic relationship.
Setting the stage
China’s dominance in rare earths has become a central element in global technology, manufacturing and defence supply chains. The term “rare earths” refers to 17 metallic elements that, despite the name, are relatively abundant—but technically challenging and environmentally intensive to mine and process. These materials are critical for electric vehicles, wind turbines, smart devices, fighter jets and more. China has long held a commanding position in the value chain: from mining to refining to finished magnet manufacture.
In recent months, Beijing responded to escalating U.S. tariffs and trade pressure by introducing tighter export controls on rare earths (and processing technology), citing national-security grounds. Those moves rattled global markets, because access to Chinese-supplied rare earths and magnets is difficult to substitute in the near term. The tension threatened supply-chain disruptions for U.S. manufacturing and global high-tech production.
Several converging pressures made this agreement timely from both sides. For the U.S., the potential supply risk of rare earths became too acute to ignore. American industries, particularly in defence, electronics and electric vehicles, rely heavily on China’s exports—any sustained disruption posed risks to production and strategic readiness.
For China, the export controls had begun to draw international backlash and may have threatened Beijing’s long-term relationships and market stability. By offering a one-year export commitment, China secures short-term diplomacy while retaining the ability to revisit the arrangement annually. The agreement also gives Beijing a face-saving path to reset tensions without ceding long-term leverage.
Moreover, the meeting with Trump allowed the U.S. to tie the rare-earth deal to broader trade incentives: the U.S. simultaneously announced a reduction in tariffs on Chinese goods. That linkage turned the rare-earth deal into not just a supply agreement, but a broader trade-diplomacy package.
Thus, the one-year horizon provides both parties breathing room—Washington gains immediate supply assurance and a headline victory; Beijing avoids immediate escalation while retaining strategic flexibility.
What the deal covers—and what remains unclear
According to publicly-reported statements, the deal centres on China agreeing to keep rare-earth exports flowing under a one-year arrangement, with the understanding that the agreement may be renewed. President Trump declared aboard Air Force One: “All of the rare earths has been settled … there is no roadblock at all on rare earth.” He added that this was “for the world, worldwide” and not just a bilateral U.S.–China issue.
Still, key details remain opaque. For example, it is unclear whether the deal covers only the most-recently expanded Chinese export controls (announced earlier in October) or the full suite of restrictions that China had put in place. At the time of writing, China has not issued a full public commentary detailing the terms.
Some reports indicate that Beijing will suspend its newly-announced export restrictions on rare earth minerals and magnets for one year, and will use this period to “study and refine” its policy. Others indicate the U.S. side expects the flow of Chinese rare earths to return to more normal levels, including finished magnet products.
In exchange for this commitment, the U.S. lowered its tariff rate on Chinese goods from 57 per cent to 47 per cent—and cut tariffs related to fentanyl-precursor trade from 20 per cent to 10 per cent. The linkage of rare-earth flows with broader tariff easing underscores the strategic breadth of the agreement.
Strategic implications for global supply chains
The one-year rare-earth deal has immediate implications for multiple industrial sectors. With supply uncertainty reduced, companies in the U.S. and allied nations can breathe easier—particularly those in electric-vehicle manufacturing, renewable-energy equipment, aerospace and defence. Inventory-planning and sourcing strategies may be recalibrated from extreme scrambling toward more stable expectations.
On the other hand, the deal reinforces the centrality of China in rare-earth value chains. Even as Washington emphasises diversification and friend-shoring of critical minerals, the fact remains that Chinese production and processing capacity remain unmatched. The one-year term, moreover, signals that the world is still on China’s timeline—and that alternative supply chains (in Australia, India, the U.S. or elsewhere) will take years to become viable at scale.
From a geopolitical angle, the agreement reduces one avenue of potential escalation between the U.S. and China—namely via rare-earth export controls. By resolving that flank for now, both sides may pivot to other battlegrounds (such as semiconductors, technology exports, or regional influence). In doing so, the deal may reflect a recalibration of global economic competition—one less characterised by abrupt supply-chain shocks and more by managed competition.
Why China agreed—and why it retains leverage
One might ask why China opted to agree rather than maintain rigid export controls. The answer lies in mixed motivations. First, the export restrictions had started to hurt not only foreign customers but potentially Chinese downstream producers and credibility. Prolonged disruptions could have spurred accelerated investment by other countries in alternative supply chains—eroding China’s long-term market dominance.
Second, the agreement allows Beijing to portray itself as cooperative and globally responsible—an image benefit amid criticism of its trade posture and industrial policy. The one-year term further preserves Beijing’s strategic flexibility: when the term expires, controls could be reinstated—or renegotiated—if China chooses.
Third, by linking the rare-earth agreement to broader trade concessions (tariff reductions, farm-product purchases, etc.), China gains reciprocal benefits while maintaining a reputation of setting conditions. In effect, China transforms a unilateral supply-control weapon into a calibrated bargaining chip.
In short, China did not “give away” its leverage entirely—but rather repackaged it under a more stable framework, while committing for the short term.
While the deal offers immediate relief, several risks and caveats remain. The one-year duration means this is a tactical truce—not a permanent settlement. When the time approaches for renegotiation, both sides could re-raise disputes. The U.S. must monitor whether the Chinese flow of rare earths truly meets industrial demand, or whether hidden bottlenecks or licensing hurdles persist.
Another risk is structural: the supply-chain remains heavily concentrated in China, so any future disruption (geopolitical, environmental, technical) could still reverberate globally. The one-year agreement may lull some into stability—but underlying vulnerability remains.
Moreover, other areas in the U.S.–China economic rivalry are still active: advanced-chip exports, subsidy regimes, technology transfers and regional defence issues. The rare-earth deal does not remove those flashpoints. Indeed, some analysts view the agreement as removing one pressure valve, only to shift attention elsewhere.
Lastly, the lack of full transparency about the agreement means ambiguities linger. Will all rare-earth categories, and all downstream magnet manufacturing flows, be covered? Will licensing delays or restrictions persist? The devil may lie in execution rather than headline declarations.
Broader consequences for U.S. policy and alliances
For the U.S., the deal gives time to accelerate domestic and allied efforts to diversify rare-earth supply—without the immediate risk of a Chinese supply cutoff. Analysts believe Washington may use the breathing room to incentivise domestic mining, processing and magnet manufacture, and to partner more closely with other producers (such as Australia, India and Canada).
For allies—especially in Europe and Asia—the agreement signals that Beijing is willing to keep certain flows stable, which eases near-term pressure on supply-chain disruption planning. At the same time, it reinforces the urgency and importance of diversification: reliance on a single dominant supplier remains a structural risk.
In diplomatic terms, the deal may mark a shift toward more structured economic engagement between the U.S. and China. Rather than explosive waves of tariffs and immediate export bans, we may be entering a phase of calibrated “managed competition”—where strategic materials like rare earths are negotiated within limited frameworks rather than used as unrestricted weapons.
The one-year rare-earth export agreement between the U.S. and China thus represents a noteworthy re-balancing in trade and supply-chain strategy. While it provides short-term stability, both countries retain considerable leverage—and the broader strategic contest remains far from resolved.
(Source:www.theguardian.com)
Setting the stage
China’s dominance in rare earths has become a central element in global technology, manufacturing and defence supply chains. The term “rare earths” refers to 17 metallic elements that, despite the name, are relatively abundant—but technically challenging and environmentally intensive to mine and process. These materials are critical for electric vehicles, wind turbines, smart devices, fighter jets and more. China has long held a commanding position in the value chain: from mining to refining to finished magnet manufacture.
In recent months, Beijing responded to escalating U.S. tariffs and trade pressure by introducing tighter export controls on rare earths (and processing technology), citing national-security grounds. Those moves rattled global markets, because access to Chinese-supplied rare earths and magnets is difficult to substitute in the near term. The tension threatened supply-chain disruptions for U.S. manufacturing and global high-tech production.
Several converging pressures made this agreement timely from both sides. For the U.S., the potential supply risk of rare earths became too acute to ignore. American industries, particularly in defence, electronics and electric vehicles, rely heavily on China’s exports—any sustained disruption posed risks to production and strategic readiness.
For China, the export controls had begun to draw international backlash and may have threatened Beijing’s long-term relationships and market stability. By offering a one-year export commitment, China secures short-term diplomacy while retaining the ability to revisit the arrangement annually. The agreement also gives Beijing a face-saving path to reset tensions without ceding long-term leverage.
Moreover, the meeting with Trump allowed the U.S. to tie the rare-earth deal to broader trade incentives: the U.S. simultaneously announced a reduction in tariffs on Chinese goods. That linkage turned the rare-earth deal into not just a supply agreement, but a broader trade-diplomacy package.
Thus, the one-year horizon provides both parties breathing room—Washington gains immediate supply assurance and a headline victory; Beijing avoids immediate escalation while retaining strategic flexibility.
What the deal covers—and what remains unclear
According to publicly-reported statements, the deal centres on China agreeing to keep rare-earth exports flowing under a one-year arrangement, with the understanding that the agreement may be renewed. President Trump declared aboard Air Force One: “All of the rare earths has been settled … there is no roadblock at all on rare earth.” He added that this was “for the world, worldwide” and not just a bilateral U.S.–China issue.
Still, key details remain opaque. For example, it is unclear whether the deal covers only the most-recently expanded Chinese export controls (announced earlier in October) or the full suite of restrictions that China had put in place. At the time of writing, China has not issued a full public commentary detailing the terms.
Some reports indicate that Beijing will suspend its newly-announced export restrictions on rare earth minerals and magnets for one year, and will use this period to “study and refine” its policy. Others indicate the U.S. side expects the flow of Chinese rare earths to return to more normal levels, including finished magnet products.
In exchange for this commitment, the U.S. lowered its tariff rate on Chinese goods from 57 per cent to 47 per cent—and cut tariffs related to fentanyl-precursor trade from 20 per cent to 10 per cent. The linkage of rare-earth flows with broader tariff easing underscores the strategic breadth of the agreement.
Strategic implications for global supply chains
The one-year rare-earth deal has immediate implications for multiple industrial sectors. With supply uncertainty reduced, companies in the U.S. and allied nations can breathe easier—particularly those in electric-vehicle manufacturing, renewable-energy equipment, aerospace and defence. Inventory-planning and sourcing strategies may be recalibrated from extreme scrambling toward more stable expectations.
On the other hand, the deal reinforces the centrality of China in rare-earth value chains. Even as Washington emphasises diversification and friend-shoring of critical minerals, the fact remains that Chinese production and processing capacity remain unmatched. The one-year term, moreover, signals that the world is still on China’s timeline—and that alternative supply chains (in Australia, India, the U.S. or elsewhere) will take years to become viable at scale.
From a geopolitical angle, the agreement reduces one avenue of potential escalation between the U.S. and China—namely via rare-earth export controls. By resolving that flank for now, both sides may pivot to other battlegrounds (such as semiconductors, technology exports, or regional influence). In doing so, the deal may reflect a recalibration of global economic competition—one less characterised by abrupt supply-chain shocks and more by managed competition.
Why China agreed—and why it retains leverage
One might ask why China opted to agree rather than maintain rigid export controls. The answer lies in mixed motivations. First, the export restrictions had started to hurt not only foreign customers but potentially Chinese downstream producers and credibility. Prolonged disruptions could have spurred accelerated investment by other countries in alternative supply chains—eroding China’s long-term market dominance.
Second, the agreement allows Beijing to portray itself as cooperative and globally responsible—an image benefit amid criticism of its trade posture and industrial policy. The one-year term further preserves Beijing’s strategic flexibility: when the term expires, controls could be reinstated—or renegotiated—if China chooses.
Third, by linking the rare-earth agreement to broader trade concessions (tariff reductions, farm-product purchases, etc.), China gains reciprocal benefits while maintaining a reputation of setting conditions. In effect, China transforms a unilateral supply-control weapon into a calibrated bargaining chip.
In short, China did not “give away” its leverage entirely—but rather repackaged it under a more stable framework, while committing for the short term.
While the deal offers immediate relief, several risks and caveats remain. The one-year duration means this is a tactical truce—not a permanent settlement. When the time approaches for renegotiation, both sides could re-raise disputes. The U.S. must monitor whether the Chinese flow of rare earths truly meets industrial demand, or whether hidden bottlenecks or licensing hurdles persist.
Another risk is structural: the supply-chain remains heavily concentrated in China, so any future disruption (geopolitical, environmental, technical) could still reverberate globally. The one-year agreement may lull some into stability—but underlying vulnerability remains.
Moreover, other areas in the U.S.–China economic rivalry are still active: advanced-chip exports, subsidy regimes, technology transfers and regional defence issues. The rare-earth deal does not remove those flashpoints. Indeed, some analysts view the agreement as removing one pressure valve, only to shift attention elsewhere.
Lastly, the lack of full transparency about the agreement means ambiguities linger. Will all rare-earth categories, and all downstream magnet manufacturing flows, be covered? Will licensing delays or restrictions persist? The devil may lie in execution rather than headline declarations.
Broader consequences for U.S. policy and alliances
For the U.S., the deal gives time to accelerate domestic and allied efforts to diversify rare-earth supply—without the immediate risk of a Chinese supply cutoff. Analysts believe Washington may use the breathing room to incentivise domestic mining, processing and magnet manufacture, and to partner more closely with other producers (such as Australia, India and Canada).
For allies—especially in Europe and Asia—the agreement signals that Beijing is willing to keep certain flows stable, which eases near-term pressure on supply-chain disruption planning. At the same time, it reinforces the urgency and importance of diversification: reliance on a single dominant supplier remains a structural risk.
In diplomatic terms, the deal may mark a shift toward more structured economic engagement between the U.S. and China. Rather than explosive waves of tariffs and immediate export bans, we may be entering a phase of calibrated “managed competition”—where strategic materials like rare earths are negotiated within limited frameworks rather than used as unrestricted weapons.
The one-year rare-earth export agreement between the U.S. and China thus represents a noteworthy re-balancing in trade and supply-chain strategy. While it provides short-term stability, both countries retain considerable leverage—and the broader strategic contest remains far from resolved.
(Source:www.theguardian.com)
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