Recent US-China trade negotiations have centered on rare earth minerals, with a potential high-stakes meeting between Presidents Trump and Xi that could mark a turning point in their economic rivalry.
The ongoing trade talks between the United States and China are intensifying around the issue of rare earth minerals, critical components in modern technology and defense systems. China, which dominates the global supply chain for these materials, recently announced stricter export controls, escalating tensions with the US. This move reflects Beijing’s strategy to leverage its control over nearly 70% of mined rare earths and 90% of processing capacity. The US, heavily reliant on these imports, views the restrictions as a threat to its electronics, renewable energy, and defense industries.
In response, President Trump threatened to impose 100% tariffs on Chinese imports and hinted at canceling a planned meeting with Chinese President Xi Jinping. These threats came amid a broader trade dispute, with Trump accusing China of unfair practices and previous agreement violations. However, over the weekend, US officials indicated that Beijing might delay implementing these controls as part of a broader trade agreement. US Treasury Secretary Scott Bessent stated that he expects China to defer on rare earth export controls, which could pave the way for a truce.
This optimism stems from discussions held in Malaysia, where trade envoys from both sides met to prepare for the potential Trump-Xi summit. US Trade Representative Jamieson Greer emphasized that rare earths have been a recurring issue, noting that Chinese negotiators seem unwilling to drop the topic entirely. The anticipated deferral would temporarily ease tensions, but experts caution that it does not resolve the underlying dependency. China’s history of using rare earths as geopolitical leverage dates back decades, making any agreement fragile.
The market reacted swiftly to these developments, with shares of US rare earth mining companies like Critical Metals, USA Rare Earth, and MP Materials falling sharply. Investors interpreted the possible delay in Chinese controls as a sign that demand for alternative sources might decrease, undermining efforts to build domestic supply chains. This sell-off highlights the sensitivity of rare earth stocks to diplomatic news, as companies have been investing in diversification projects to reduce US reliance on China.
This situation echoes past confrontations; during Trump’s first term, rare earth exports were a major point of contention, and previous deals have been marred by allegations of non-compliance. For instance, China fell short of its commitment to increase purchases of American goods under a 2021 agreement, leading to renewed investigations by US trade officials. The deep-seated mistrust between the two nations is evident, with each using economic leverage to gain an upper hand in a rivalry that spans technology, security, and global influence.
If the meeting between Trump and Xi occurs this week, it could result in a temporary resolution, such as a deferral of export controls and avoided tariffs. However, given the history of broken promises and sudden policy shifts, any agreement may be fragile. Trump has previously undermined diplomatic victories, such as imposing export controls on chip software shortly after trade deals, illustrating the volatility of US-China relations. A successful summit could stabilize markets and reduce immediate trade barriers.
The outcome of these talks will significantly impact global trade dynamics, technology industries, and efforts by the US to diversify its rare earth supply chains away from China. Long-term, the US is investing in domestic mining and partnerships with allies like Australia, but progress is slow. Stakeholders are watching closely for any signs of a lasting deal or further escalation, as the rivalry over critical minerals could shape economic and security policies for years to come.