US-China rare earths truce dominated headlines after President Donald Trump and President Xi Jinping agreed to a one‑year pause on China’s sweeping new export controls for critical minerals. Trump called it a breakthrough for global supply chains and the U.S. economy. But the agreement comes with trade‑offs, and crucially, many of Beijing’s existing curbs remain in force, leaving manufacturers exposed to licensing delays and policy uncertainty.
Key Points
On board Air Force One, Trump said the two leaders had “settled” differences over access to China’s rare earths. “There’s no roadblock at all on rare earth. That will hopefully disappear from our vocabulary for a little while,” he said. In exchange for the pause, the U.S. agreed to delay a proposed expansion of its export blacklist that would have added thousands of Chinese firms, underscoring the high‑stakes quid pro quo that shaped the US-China rare earths truce.
Why the US-China rare earths truce matters now
The truce targets a chokepoint that affects sectors from defense to semiconductors to electric vehicles. Rare earth magnets and processing equipment are critical inputs for fighter jets, advanced chips and drivetrains. China’s dominance in refining and magnet production has given Beijing significant leverage since it unveiled fresh controls earlier this year.
- China will delay for one year its broader new export regime for critical minerals
- Existing controls, especially on rare earth magnets, remain in force
- The U.S. will postpone expanding its export blacklist while talks continue
U.S. Trade Representative Jamieson Greer acknowledged that prior restrictions are still constraining flows. “We have some rare earth controls from earlier in the year on magnets, where we got to a decent flow, but now we expect them to flow even, even better,” he told reporters, adding that Washington expects a “more general approach” from Beijing. Skeptics say the US-China rare earths truce leaves fundamental risks intact as long as earlier curbs and cumbersome licensing persist.
What changed—and what did not—under the US-China rare earths truce
What changed:
- One‑year pause: China delays the rollout of new, sweeping export controls on critical minerals
- Blacklist freeze: U.S. holds off on adding thousands of Chinese companies to its export blacklist
- Tariff de‑escalation: Trump rolled back threats of a 100% tariff increase and eased other measures
What did not:
- Existing magnet controls: Earlier Chinese restrictions from April remain in place
- Licensing friction: Companies still face longer approval times and repeated filings for export licenses
- Strategic linkages: Washington accepted a negotiating linkage between AI chip controls and rare earths
The White House has not released a detailed fact sheet. China’s commerce ministry published a document outlining its view, leaving room for divergent interpretations of the US-China rare earths truce and its practical scope.
Context: Months of tit‑for‑tat and a wider trade thaw
China introduced export restrictions on rare earth magnets in April, then outlined sweeping new critical‑minerals controls in early October. The U.S. countered with tariff threats and expanded technology controls, and signaled a possible 100% tariff increase. Leading into the leaders’ meeting, Washington also announced tariffs tied to the fentanyl trade and floated port fees for Chinese ships.
After the meeting:
- The 20% fentanyl tariff was halved
- Planned port fees on Chinese ships were put on hold for a year
- A proposed blacklist expansion was paused
Bloomberg Economics estimates that if the fentanyl tariff is halved, the average tariff rate on Chinese goods falls to around 31%, well below the roughly 50% rate on many products from Brazil and India—potentially making China a more attractive production base than some alternatives in the near term.
The pushback: A risky linkage and a “dangerous precedent”
China hawks argue the US-China rare earths truce concedes too much leverage. By agreeing to pause new tech controls in exchange for a minerals reprieve, they say Washington linked two separate toolkits—one focused on AI and advanced chips, the other on critical materials—making future policy more constrained.
- “The Chinese rare earth controls were a massive escalation,” said Chris McGuire, a former National Security Council official. “Instead of punching back, we agreed to roll back our controls… it sets a dangerous precedent.”
- Derek Scissors at the American Enterprise Institute said U.S. policy appears driven by sectors dependent on China, comparing it to Europe’s past deference to automakers.
Critics worry the one‑year ceasefire benefits Beijing more, since U.S. export controls are more targeted and need frequent updates to remain effective. That dynamic could blunt Washington’s tech policy over the truce period.
Industry reality check: “Everything but rare earths”
Executives in magnets and advanced materials were cautious. “This China‑US truce was a lot about everything but rare earths and permanent magnets,” said Wade Senti, president of Advanced Magnet Lab Inc. “The risk for the military I don’t think, quite frankly, has changed since the beginning of June.”
On the ground, companies report:
- Longer approval times for export licenses
- Repeated filings required for each order
- Broader disclosure demands, including sensitive supply chain details
- Spillovers to Europe, where firms in Germany face similar data requests to secure licenses
Trade lawyer Nazak Nikakhtar warned that if China continues “sitting on licenses,” the practical outcome of the US-China rare earths truce may be minimal, given that April’s controls triggered the current bottlenecks and remain in place.
Legal overhang: Tariffs face a Supreme Court test
A looming Supreme Court case could upend parts of the current tariff structure. Lower courts have ruled that using the International Economic Emergency Powers Act of 1977 to impose tariffs was unlawful. If the high court agrees, many of Trump’s new tariffs—including China measures—could be thrown out, further complicating the negotiating backdrop for any extension of the US-China rare earths truce.
What Beijing did not get
China did not secure approval to purchase Nvidia’s latest Blackwell AI chips. Greer said Blackwell was “not on the table right now,” though Nvidia CEO Jensen Huang sounded cautiously optimistic the company could eventually sell into China. Nor did Beijing receive commitments to expand Chinese investments in the U.S., a feature of deals Washington has encouraged with Japan and South Korea.
Still, former negotiator Wendy Cutler said Beijing “drove a hard bargain,” insisting on compensation for every concession—evidence, she argued, that “two can play at this game” in Trump’s second term.
What the US-China rare earths truce means for companies
For defense, aerospace, auto and electronics manufacturers, the practical effects are nuanced:
- Short‑term reprieve: Delaying new controls could help non‑defense firms purchase tooling and machinery for processing certain rare earths and magnets
- Persistent friction: Legacy controls and licensing queues remain a bottleneck for U.S. and European buyers
- Supply chain risk: Companies may need to increase safety stocks, diversify suppliers and invest in non‑China processing routes
Action items leaders are considering:
- Build redundancy: Qualify alternate suppliers or non‑China processing partners for rare earth separation and magnet fabrication
- Map exposures: Identify parts and programs dependent on China‑sourced magnets or alloy powders and set escalation plans
- Contract levers: Negotiate clauses that allocate licensing risk and address delivery slippage
- Policy engagement: Coordinate with industry groups to streamline export licensing and improve transparency
The politics of the pause—and the year ahead
The US-China rare earths truce is part of a broader effort to cool tensions through 2026, with more summits planned. Yet previous “IOUs” have lapsed, and industry veterans note that pauses in rhetoric have not always produced relief in practice. Without a comprehensive accord on minerals and technology, the risk of renewed escalation remains.
Washington’s goals—de‑risking supply chains while protecting strategic tech—will continue to collide with Beijing’s leverage in processing and magnet manufacturing. A durable solution would likely require:
- Clear rules on licensing timelines and documentation
- Transparent carve‑outs for non‑defense applications
- Parallel investment in alternative processing capacity outside China
- Guardrails that decouple minerals policy from tech‑export enforcement
Absent that, the US-China rare earths truce buys time but does not resolve core vulnerabilities.
Reactions and updates
- U.S. officials framed the pause as a global supply chain win and credited Trump’s personal diplomacy
- China hawks warned the linkage between chip controls and minerals weakens U.S. leverage
- Industry leaders signaled the immediate risk profile has not improved, citing ongoing licensing hurdles
- Markets will watch for concrete implementation steps, including any acceleration in license approvals
Outlook: Truce today, tests tomorrow
The US-China rare earths truce lowers the temperature but leaves structural risks intact. For manufacturers, the next twelve months will be a test of whether licensing flows improve and whether diversification gains traction. For policymakers, it is a test of whether a narrow pause can build toward a broader settlement without sacrificing strategic guardrails.
If licensing metrics improve, and alternative supply chains scale, the truce could be a bridge to stability. If not, companies may find themselves back where they started—managing the same bottlenecks under a new headline. Daily Known will track the data, the legal rulings and the on‑the‑ground realities as this story develops.
FAQ’s
What is the US-China rare earths truce and what was agreed?
China will pause new critical‑minerals export controls for one year; the U.S. will delay expanding its export blacklist and ease certain tariff threats. Existing Chinese magnet controls remain.
How long does the US-China rare earths truce last and what happens after?
The pause lasts one year. Unless a broader deal is struck, China could implement the sweeping controls afterward; both sides can also re‑escalate.
How does the US-China rare earths truce affect U.S. industries like defense, semiconductors and EVs?
It offers limited relief for sourcing gear and inputs, but licensing delays and earlier magnet curbs persist. Supply chain risk remains elevated, so diversification and inventory buffers are still key.
Did the truce include approval for Nvidia’s Blackwell chip sales to China?
No. Officials said Blackwell was not on the table “right now.” Nvidia’s CEO signaled cautious optimism, but no policy change has been announced.
Article Source: Bloomberg
Image Source: Bloomberg
