China agreed to suspend newly imposed export controls on rare earth elements for one year following high stakes talks between President Donald Trump and Chinese President Xi Jinping in Busan, South Korea, offering temporary reprieve for global industries dependent on critical minerals used in electric vehicles, defense systems, and clean energy technologies.
The agreement reached Thursday at Gimhae Air Base marks the most significant easing of tensions in months between the world’s two largest economies, with Trump declaring the rare earth issue “settled” after what he described as an “amazing meeting” with Xi. The 90 minute bilateral discussion occurred on the sidelines of the Asia Pacific Economic Cooperation summit, representing the leaders’ first face to face encounter since 2019.
Under the deal, China will suspend rare earth export control measures announced October 9 while the United States pauses implementation of its 50 percent ownership rule targeting Chinese company subsidiaries for one year. Trump also reduced the fentanyl related tariff on Chinese goods from 20 percent to 10 percent, lowering the overall tariff rate on Chinese imports from 57 percent to 47 percent.
“There’s no roadblock at all on rare earths, that will hopefully disappear from our vocabulary for a little while,” Trump told reporters aboard Air Force One departing South Korea. China’s Commerce Ministry confirmed Beijing would make “corresponding adjustments” to its trade war countermeasures, though many details about the agreement’s scope remain unclear.
China controls nearly 70 percent of global rare earth mining and processes almost 90 percent of world supply, giving Beijing powerful leverage in its trade standoff with Washington. The critical minerals play vital roles in manufacturing smartphones, wind turbines, electric vehicle motors, advanced weapon systems, and renewable energy applications where few substitutes exist at scale.
Beijing’s October 9 announcement drastically tightened export restrictions on rare earths, imposing complex new rules that extended controls beyond China’s borders to include companies worldwide using Chinese origin materials. The sweeping extraterritorial scope rattled global markets and widened the trade conflict to include nations beyond the United States, potentially miscalculating by taking on the entire world simultaneously rather than targeting Washington specifically.
Shares of U.S. listed rare earth mining companies rallied Thursday following confirmation of the agreement. Critical Metals jumped nearly seven percent in premarket trading, USA Rare Earth rose around six percent, and Energy Fuels climbed three percent. MP Materials and NioCorp Developments both gained approximately three percent as investors anticipated reduced pressure on alternative supply chains being developed outside China.
The suspension provides breathing room for American and allied efforts to develop alternative rare earth sources that could eventually reduce dependence on Chinese supplies. Trump signed multiple agreements during his Asia trip aimed at securing critical mineral supplies, including partnerships with Japan, Malaysia, and other nations seeking to counter Beijing’s chokehold on the sector.
Wendy Cutler, senior vice president at Asia Society Policy Institute, suggested these bilateral deals might “benefit immensely from being linked together in a plurilateral agreement with strong commitments, financing and pooling of resources.” She expects more such agreements to follow under the Trump administration as Washington pursues supply chain diversification strategies.
Yet building alternative rare earth processing capacity requires years and billions in capital investment. China’s dominance resulted from decades of strategic investment, environmental externalization through lax pollution controls, and integrated supply chains linking mining through final manufacturing. Western nations shuttered rare earth operations during periods when China flooded markets with cheap supply, making restart economically challenging.
The agreement extends beyond rare earths to include suspension of port fees both nations had imposed on each other’s vessels. The United States will pause for one year port fees charged to Chinese ships docking at American harbors under Section 301 of the Trade Act, while China will suspend corresponding countermeasures on U.S. vessels. These maritime fees represented escalation in the trade conflict affecting shipping, logistics, and shipbuilding industries.
Trump also claimed China agreed to purchase “tremendous amounts” of American soybeans and other farm products starting immediately. However, evidence suggests modest volumes compared to historical norms. Ahead of the summit, China owned COFCO bought three U.S. soybean cargoes for December and January shipment, totaling approximately 180,000 metric tons. By comparison, China purchased nearly six million tons of U.S. soybeans in October 2024 alone and 27 million tons for the full year.
China had halted soybean purchases for months earlier this year during the tit for tat tariff war, costing American farmers billions in lost revenue. The agricultural sector’s political importance in swing states gives Trump incentive to emphasize progress on farm exports even when actual volumes remain uncertain. Chinese Commerce Ministry statements confirmed both sides reached consensus on “expanding agricultural trade” without specifying quantities or timelines.
On fentanyl, Trump expressed confidence that Xi would “work very hard to stop the flow” of the synthetic opioid and its precursor chemicals into the United States. “I believe he is going to work very hard to stop the death that is coming in,” Trump stated. China has repeatedly promised to reduce fentanyl trafficking but faces accusations from experts of inadequate follow through on enforcement commitments.
The Commerce Ministry said both sides reached consensus on “issues such as cooperation in fentanyl control” without elaborating on specific measures China would implement. Skeptics note that previous Chinese commitments on fentanyl have produced limited results, with precursor chemicals continuing to flow to Mexican cartels that manufacture finished fentanyl for the U.S. market.
Xi struck notably conciliatory tone during the photo opportunity at Gimhae Air Base, urging that Washington and Beijing be “friends and partners” and describing it as a “great pleasure” to meet Trump for the sixth time. The Chinese leader said it was only “normal” for the two economic superpowers to have “frictions now and then,” adding that “China’s development goes hand in hand with your vision to Make America Great Again.”
That messaging marked shift from Xi’s meeting with former President Joe Biden late last year, during which the Chinese leader emphasized more “inevitable competition” between the two countries. Analysts interpreted the softer tone as reflecting China’s interest in stabilizing economic relations amid domestic growth challenges including property sector troubles, youth unemployment, and deflationary pressures.
The agreements do not amount to comprehensive trade deal resolving fundamental tensions between Washington and Beijing over technology transfers, intellectual property protection, market access, industrial subsidies, human rights, and Taiwan. Trump claimed after the meeting that a comprehensive deal would be ready to sign “pretty soon,” though observers remain skeptical given the complexity of unresolved issues.
Overall tariff rates on Chinese goods remain at historically high levels despite the 10 percentage point reduction. The 47 percent average tariff still represents massive increase from pre 2018 levels when tariffs averaged around three percent. These elevated tariffs continue imposing costs on American consumers and businesses dependent on Chinese manufactured goods and components.
Industry analysts suggest the one year timeline for the rare earth suspension creates pressure for both sides to make progress on broader trade negotiations. If talks stall, China could reimpose export controls next October while the United States might restart subsidiary targeting rules and port fees. This dynamic gives both nations incentive to pursue substantive negotiations rather than simply enjoying temporary relief.
The agreement’s annual renewal structure means uncertainty persists for companies making long term investment decisions about supply chains, manufacturing locations, and technology development. Businesses prefer stable, predictable policy environments enabling multi year planning rather than twelve month pauses requiring constant monitoring of diplomatic relations and trade negotiations.
Critics argue the deal primarily postpones conflicts rather than resolving them. Fundamental disagreements about China’s state directed economic model, technology ambitions, and geopolitical aspirations remain unaddressed. The trade war’s underlying drivers persist even as both sides step back from immediate escalation threatening economic damage neither government desires ahead of domestic political considerations.
For global manufacturers, the suspension provides welcome relief from supply chain disruptions that threatened production of everything from smartphones to electric vehicles to military hardware. Yet the reprieve also highlights continued vulnerability to geopolitical tensions affecting access to materials essential for modern technology and clean energy transitions.
Whether Trump and Xi can build on this temporary truce to achieve more durable trade framework remains uncertain. The one year timeline begins immediately, with both sides committing to technical discussions aimed at restoring broader trade stability. Success depends on whether political will exists in both capitals to make concessions necessary for comprehensive agreement or whether domestic pressures and strategic competition ultimately prevent meaningful progress beyond temporary pauses in escalation.
