• United States
• China
• Lili Pike

June 11, 2025, 5:52 PM

“OUR DEAL WITH CHINA IS DONE,” U.S. President Donald Trump proclaimed on Wednesday in a post on Truth Social. After two days of marathon negotiations in London, Trump said the two superpowers were retreating from their latest trade standoff, with Beijing agreeing to supply rare-earth elements and magnets to the United States once again.

Hours after Trump’s statement, the Wall Street Journal reported that China would immediately approve rare-earth licenses for U.S. companies, citing people familiar with the deal, which has yet to be made public. If critical minerals do start flowing to U.S. ports again, the deal will be a significant reprieve for U.S. manufacturers that rely on Chinese supplies to build everything from cars to missiles.

However, rather than a final and complete deal, the agreement is only the first phase of a broader reckoning over the supply chain war that both countries have waged in recent years.

“I think we’re in the first inning of a new game. The rare earths have really changed the goalposts here in a big way,” said Paul Triolo, a partner at DGA-Albright Stonebridge Group, a global advisory firm.

The two countries arrived at this inflection point because Beijing dared to leverage its monopoly on rare earths—a powerful card that it has long held in its back pocket. In response to Trump’s barrage of tariffs, which briefly ratcheted U.S. duties on Chinese imports up to 145 percent, China announced a new licensing system in early April to restrict the export of seven rare-earth elements and related magnets, with the stated intention of limiting their military use.

During the first round of trade talks between the United States and China in Geneva last month, China agreed to roll back its nontariff retaliatory measures while the United States significantly lowered its tariffs on Chinese goods. U.S. officials walked away assuming that the issue on rare earths had been resolved.

But Beijing had a different understanding. The Chinese Ministry of Commerce asserted that its new licensing system was a global effort to bolster national security and was not targeted at the United States—and therefore was not directly related to the U.S.-China talks.

Officials in Washington grew increasingly anxious as U.S. factories—waiting for license approvals from China—started to suffer shortages. In one instance, Ford Motor Company paused production of SUVs at one factory in May after running out of magnets. As U.S. companies felt the heat, Washington resorted to retaliatory tools, imposing new controls on the export of semiconductor technology, aviation equipment, and certain fuels.

Those moves were effective in bringing both sides back to the negotiating table. Last week, Chinese President Xi Jinping and Trump held their first known phone call since Trump returned to office, which set the stage for this week’s talks in London. From the references in Trump’s Truth Social post after the call, it was clear that the once obscure issue of rare earths was at the top of the president’s mind.

“I think China wanted to send a message that, ‘Hey, you want to play with fire, we have some fire, too.’ Fortunately, in this case, it looks like we’ve come to some sort of detente here,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics. “I think it’s a reminder that there are tools on each side that can be used to hurt the other.”

The details of the London agreement are still being released, but the truce is telling. This is the first time that the United States and China have both explicitly placed their supply chain cards on the bargaining table; the inclusion of U.S. officials responsible for export controls—Commerce Secretary Howard Lutnick and Undersecretary of Commerce for Industry and Security Jeffrey Kessler—showed that both countries had entered a new phase of negotiations.

Washington agreed to roll back its recent export restrictions, according to U.S. officials, and ensure that Chinese students maintain access to U.S. universities, seemingly reversing U.S. Secretary of State Marco Rubio’s plan to revoke Chinese student visas. In exchange, China will greenlight rare-earth exports.

But, critically, Beijing isn’t dismantling its licensing system. Its Ministry of Commerce will grant U.S. companies six-month licenses, allowing China to maintain leverage over the United States. And the United States has no quick fix for its dependence on China. As an example, the U.S. military is entirely reliant on China to supply the rare-earth element samarium for use in missiles.

The reprieve’s temporary nature reflects the reality that the United States and China still have a slew of issues to resolve before a wider trade deal can truly be marked as “done.” The issue of export controls will remain central to that broader negotiation.

Going back to Trump’s first term and even former President Joe Biden’s, the United States has been piling export restrictions on China, with a focus on limiting the country’s access to advanced semiconductors for artificial intelligence development. In Biden’s final meeting with Xi in Lima, Peru, last fall, the Chinese leader communicated that the United States was crossing a red line by hindering China’s development through economic coercion.

China’s willingness to actually play the rare-earth card may have pushed the two countries’ to the breaking point for now, but Beijing and Washington still have to consider whether they will each roll back previous export restrictions and whether they will scrap future ones, which could impose heavy costs on both economies once again.

“The U.S. doesn’t normally negotiate around these things already,” Triolo said. “The fact that they’ve been forced to negotiate this because of the rare earths issue is unusual. But then going further on, this is going to require a lot of internal discussion within the U.S. government, where the drive behind the export controls hasn’t gone away, and the constituencies that support them are still very strong … So it’s going to be a challenge to find a sort of landing zone.”

The agreement brokered in Geneva, which both sides agreed to uphold—with newly clarified conditions—in London, is set to expire in August. Until then, Lutnick said that the United States would maintain its current tariffs on China, which are at a total of 55 percent. Before the August deadline, the trade teams will have much to hash out: China’s role in the fentanyl trade, which was the basis for Trump’s first round of tariffs on China earlier this year; China’s export dominance and Trump’s desire to rebalance trade; and, finally, the future of the chokepoints that Beijing and Washington are now so acutely aware of.

All this means that the U.S. trade negotiations lead, Treasury Secretary Scott Bessent, and the Chinese lead, Vice Premier He Lifeng, may have a long summer in European capitals to look forward to together.