Trump’s Rare Earth Deal with China: A Fragile Truce Amid Strategic Shifts

Trump’s Rare Earth Deal with China: A Fragile Truce Amid Strategic Shifts

President Donald Trump announced a breakthrough in U.S.-China trade relations, revealing a tentative agreement to restore the flow of rare earth minerals and magnets from China to the United States. This deal, emerging from marathon negotiations in London, seeks to stabilize a critical supply chain while allowing Chinese students access to American universities. However, with U.S. tariffs on Chinese goods set at 55% and China imposing 10% tariffs on U.S. imports, the agreement represents a delicate truce rather than a lasting resolution. As the Trump administration simultaneously explores African mineral sources and considers wartime powers to boost domestic production, this development signals a multifaceted strategy to secure America’s economic and national security interests. Here’s TheBrink sharing into the implications, opportunities, and potential pitfalls of this deal.

The Deal: A Temporary Detente in the U.S.-China Trade War

The agreement, described as a “framework” by U.S. Commerce Secretary Howard Lutnick, builds on a May 2025 Geneva truce that temporarily de-escalated a tit-for-tat tariff war. Earlier this year, Trump imposed tariffs as high as 145% on Chinese imports, prompting China to retaliate with 125% tariffs and export restrictions on seven rare earth elements critical for automotive, defense, and tech industries. These restrictions disrupted U.S. manufacturing, with companies like Ford halting production due to magnet shortages. The London talks, concluded on June 10, 2025, aim to restore the Geneva consensus by ensuring China resumes rare earth exports “up front” while the U.S. lifts restrictions on Chinese student visas and certain export controls, such as those on semiconductor software and aerospace components.

The tariff structure remains a sticking point. The U.S. will maintain a 55% tariff on Chinese goods, comprising a 10% base “reciprocal” tariff, a 20% fentanyl-related tariff, and 25% from Trump’s first term, while China applies a 10% tariff on U.S. imports. Both sides have agreed to remove some retaliatory measures, but the deal awaits final approval from Trump and Chinese President Xi Jinping.

Why Rare Earths Matter: A Geopolitical and Economic Flashpoint

Rare earth elements (REEs) are indispensable for modern technology, powering everything from electric vehicle motors to F-35 fighter jets and Tomahawk missiles. China dominates the global supply, controlling 60% of production and 90% of refining, giving it significant leverage over global markets. When China imposed export controls in April 2025 in response to Trump’s tariffs, U.S. automakers and defense contractors faced immediate disruptions, with Ford shutting down its Chicago plant for a week and European and Japanese manufacturers reporting similar issues.

The London agreement addresses this chokehold by prioritizing the resumption of REE and magnet exports, a move Trump hailed on Truth Social as a “great deal” that ensures “full magnets, and any necessary rare earths, will be supplied, up front, by China.” However, this “handshake deal” is fragile and subject to change, given the history of U.S.-China trade volatility. US panicked automakers had halted production lines before the agreement was reached.

Strategic Shifts: African Sources and Wartime Powers

While the China deal provides short-term relief, the Trump administration is hedging its bets by pursuing alternative REE sources and domestic production. The U.S. has engaged African nations, notably signing a memorandum with Saudi Arabia to develop a mine-to-magnet supply chain and supporting Australia’s Eneabba Rare Earths Refinery with a $1.25 billion loan. These moves aim to reduce reliance on China, which has used its mineral dominance as a geopolitical weapon.

Additionally, Trump signed an Executive Order on April 16, 2025, invoking Section 232 to investigate risks to national security from foreign mineral dependence. This could lead to tariffs replacing the current reciprocal rates if vulnerabilities are confirmed. More strikingly, the administration is considering wartime powers, such as the Defense Production Act, to fast-track domestic REE mining and processing. While these efforts signal a long-term strategy, building a robust U.S. supply chain could take years, given China’s 30-year head start in processing infrastructure.

Some celebrate the China deal as a step toward revitalizing U.S. manufacturing, while others express skepticism about the feasibility of domestic production, citing regulatory and environmental hurdles.

Chinese Students and Broader Implications

A surprising element of the deal is the U.S. concession to allow Chinese students to attend American universities, reversing earlier threats by Secretary of State Marco Rubio to revoke visas for those in “critical fields” due to espionage concerns. Trump emphasized that Chinese student enrollment “HAS ALWAYS BEEN GOOD WITH ME!” suggesting a pragmatic trade-off to secure REE supplies. This move has sparked debate encouraging some to start questioning the national security implications, while some see it as a diplomatic gesture to maintain open channels with Beijing.

The deal’s broader implications are significant. It temporarily averts a supply chain crisis that threatened U.S. defense and automotive sectors, but the high U.S. tariffs and ongoing tensions suggest a precarious balance.

Looking ahead, the deal’s success hinges on the final approval by Trump and Xi, expected to be a formality given the public announcements. However, the lack of detailed public terms and the history of mutual accusations, Trump claimed China violated the Geneva truce, while Beijing criticized U.S. export controls, suggests that trust remains thin. The 90-day tariff pause, set to expire in August 2025, may be extended, but a comprehensive trade deal seems unlikely in the near term, as both sides prioritize strategic interests.

Opportunities for the U.S.:

• Diversifying Supply Chains: Investments in African and Australian REE sources could reduce long-term dependence on China, enhancing national security and economic resilience.

• Domestic Innovation: Using wartime powers to expedite domestic production could spur technological advancements in mining and processing, creating jobs and reducing environmental concerns over time.

• Global Alliances: Strengthening ties with allies like Australia and Saudi Arabia could position the U.S. as a leader in a non-China-centric REE market.

Risks and Challenges:

• Fragility of the Truce: Analysts like Scott Kennedy warn that the deal does little to address deep structural issues, and any geopolitical flare-up could reignite the trade war.

• Economic Costs: The 55% tariffs, while lower than the previous 145%, still strain U.S. businesses and consumers, potentially fueling inflation.

• China’s Leverage: China’s control over REE refining and its bureaucratic export licensing system could be used as leverage in future disputes.

The U.S.-China rare earth deal is a critical step toward stabilizing vital supply chains, but it is far from a permanent fix. The Trump administration’s aggressive tariff strategy and simultaneous push for African sources and domestic production reflect a broader effort to reshape global trade dynamics. However, the deal’s fragility, coupled with ongoing geopolitical tensions and human rights concerns, underscores the need for cautious optimism. For readers of TheBrink, this development offers a window into the complex interplay of economic policy, national security, and global diplomacy, a space where bold moves and calculated risks will shape the future of U.S. industry and international relations.

-Chetan Desai (chedesai@gmail.com)