China's Control Of Rare Earths Forced US To Negotiate; Details Here

In the escalating rivalry between the United States and China, the most consequential shift in recent trade talks wasn’t about tariffs, semiconductors, or military posturing; it was about a category of raw materials that rarely makes headlines: rare earth magnets. These components, essential to modern technology and defense systems, unexpectedly compelled the US to return to the negotiating table with China.

US President Donald Trump, long critical of Beijing’s trade tactics, took to his social media platform, Truth Social, to announce a new trade agreement with China. “FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UP FRONT, BY CHINA,” he wrote, claiming the deal was “DONE” pending final approval from him and Chinese President Xi Jinping.

The announcement marked a stark reversal from Trump’s earlier stance that China held “no leverage.” Despite aggressive US measures, such as chip bans and technology sanctions, it was China’s control over rare earths that ultimately shifted the balance.

Magnets At The Heart Of Global Manufacturing

Rare earths, particularly the small but powerful magnets made from them, are essential to countless high-tech applications. These include electric vehicles, smartphones, wind turbines, and military equipment like F-35 jets. In the spring, when China imposed tighter export controls, supply chains around the world felt the impact.

Factories slowed down or halted production altogether. Ford temporarily paused production of its Explorer SUV in Chicago. Tesla cited shortages affecting its robotics program. Even global defense systems and Ukraine’s drone supply lines faced disruptions.

“They are showing their muscles,” a manufacturer struggling with new Chinese export requirements told The Wall Street Journal.

Strategic Use Of Scarcity

While rare earth elements are not geologically scarce, China dominates the global processing and production. This dominance has made them a powerful strategic asset. In April, Beijing introduced a stringent export-licensing system that slowed shipments and required detailed documentation, including photos of end products.

The ripple effects were global. Volkswagen asked suppliers to reduce rare earth content. US defense contractors raised alarms about depleted stockpiles. In effect, these materials became a geopolitical bargaining chip.

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Behind The Scenes Of A New Deal

By early June, China’s calculated restrictions had succeeded in pushing rare earths to the forefront of trade discussions. A new agreement emerged from talks in London, one that prioritized raw materials over rhetorical posturing.

Trump claimed victory, stating: “WE ARE GETTING A TOTAL OF 55 PER CENT TARIFFS, CHINA IS GETTING 10 PER CENT.” However, the fine print told a different story. According to US Commerce Secretary Howard Lutnick, the deal included upfront deliveries of critical rare earths to US industries in exchange for Washington softening some of its export restrictions.

China, meanwhile, retained full control over the permitting system, ensuring that its regulatory oversight remained intact.

The Global Dependence On China

Despite their name, rare earth elements are not exceedingly rare. Their power lies in the highly concentrated nature of their production. Since the late 20th century, China has outcompeted other nations by driving down prices, resulting in over 90 per cent of global magnet manufacturing now occurring within its borders.

Western nations are attempting to catch up. MP Materials in the US is developing facilities in Texas to supply General Motors, while Australia’s Lynas Rare Earths is expanding in Southeast Asia. But these efforts are years away from matching China’s scale.

Although Trump hailed the deal as a win, the conditions reflect Xi Jinping’s long-term strategy. While exports may resume and tariffs temporarily drop, China’s grip over rare earth supply chains is stronger than ever. Future exports will be tightly monitored, with Chinese authorities demanding granular detail about where and how the materials are used.