The United States and China have reached a groundbreaking one-year agreement on rare earth supplies, with President Donald Trump announcing significant tariff reductions following his highly anticipated meeting with Chinese President Xi Jinping in South Korea on October 30, 2025.
Key Highlights
- Trump reduced fentanyl-related tariffs on China from 20% to 10%, while overall Chinese import tariffs dropped from 57% to 47% as part of the US China rare earths deal
- China agreed to halt planned export restrictions on five additional rare earth elements that were set to take effect November 8, 2025
- Both leaders committed to annual renegotiations of the rare earth agreement, with Trump planning to visit China in April 2026
Opening Overview: Historic Breakthrough Amid Escalating Tensions
The US China rare earths deal represents the most significant diplomatic breakthrough between the world’s two largest economies since trade tensions escalated dramatically in September 2025. Trump rated his meeting with Xi Jinping as “a 12 on a scale of 0 to 10,” emphasizing that “all the rare earths has been settled, and that’s for the world.”
This agreement comes after China imposed sweeping export controls on critical minerals in October 2025, prompting Trump to threaten retaliatory 100% tariffs on all Chinese goods. The US China rare earths deal effectively prevents a potentially catastrophic trade war that could have disrupted global supply chains across defense, automotive, and electronics manufacturing sectors. With China controlling approximately 69% of global rare earth mining and 92% of refining capacity, this agreement provides crucial supply security for American manufacturers heavily dependent on these strategic materials.
US-China Sign 1-Year Deal On Rare Earths, #Trump Rates Xi Meet "12 On 10"
— Nate D (@GoFundMe_Nate) October 30, 2025
Trump said he has also agreed to cut fentanyl-related tariffs on China to 10 percent, as the two leaders met in person after six years, amid ongoing tensions @ndtv https://t.co/qaQ9VPL8WH
Strategic Importance of Rare Earth Elements in Global Trade
- China dominates 98% of global magnet manufacturing using rare earth materials essential for electric vehicles and wind turbines
- Global rare earth demand is projected to reach 220,000-250,000 metric tons by 2025, driven primarily by renewable energy infrastructure
The US China rare earths deal addresses one of the most critical vulnerabilities in American supply chains, as rare earth elements serve as the backbone of modern technology from smartphones to military defense systems. China’s Bayan Obo Mining District in Inner Mongolia contains an estimated 36 million tons of rare earth oxide equivalent, representing the world’s largest single deposit and accounting for 83% of China’s total reserves. The strategic significance of the US China rare earths deal becomes apparent when considering that China increased its rare earth output from 31,000 metric tons in 1994 to 270,000 metric tons in 2024, systematically undercutting global competitors.
American manufacturers have faced particular challenges with neodymium and dysprosium magnets, which are vital for wind turbines and electric motors, with demand projected to rise by more than 10% annually through 2025. The US China rare earths deal provides immediate relief from Beijing’s October 2025 export controls that would have restricted five additional rare earth elements, including holmium and other heavy rare earths critical for high-tech applications. This agreement ensures continued access to materials where China maintains near-monopolistic control, particularly in refining operations that transform raw ore into usable industrial inputs.
Tariff Reductions Signal Broader Trade Reconciliation
- Overall US tariffs on Chinese goods decreased from 57% to 47% as part of the comprehensive agreement
- Fentanyl-related tariffs specifically reduced from 20% to 10%, addressing a key bilateral irritant
The tariff concessions within the US China rare earths deal mark a dramatic reversal from the escalating trade tensions that characterized much of 2025, when combined US levies on Chinese imports had reached as high as 145% before previous negotiations brought them down. Trump’s decision to halve fentanyl-related tariffs demonstrates significant progress on an issue that has strained bilateral relations, with Beijing previously arguing that the drug crisis remains fundamentally an American domestic problem. The US China rare earths deal’s tariff structure represents a calculated compromise, as Trump had originally threatened 100% tariffs on all Chinese goods in response to Beijing’s rare earth export controls announced in October 2025.
These reductions provide immediate economic relief for American importers who have faced unprecedented tariff burdens, with average US tariffs on Chinese exports having peaked at 126.5% in early May 2025 before gradual reductions. The fentanyl tariff reduction acknowledges China’s recent cooperation efforts, including Beijing’s agreement to purchase US soybeans for the first time in several months as a goodwill gesture ahead of the summit. The US China rare earths deal’s tariff framework establishes a foundation for broader trade normalization, with both leaders agreeing to continue negotiations toward a comprehensive trade agreement.
China’s Export Control Strategy and Global Market Impact
- Beijing’s October 2025 export controls targeted five additional rare earth elements with extraterritorial jurisdiction provisions
- China’s rare earth production quotas increased modestly by 5.9% in 2024, the smallest increase in recent years
The timing of the US China rare earths deal reflects Beijing’s strategic use of export controls as diplomatic leverage, with China announcing its expanded restrictions just weeks before the planned Trump-Xi summit. China’s Ministry of Commerce had introduced extraterritorial jurisdiction for the first time in its export control regime, requiring foreign entities to obtain licenses when transferring Chinese-origin rare earth materials between third countries.
This represented a significant escalation that closely mirrored US export control tactics, demonstrating China’s growing sophistication in economic statecraft. The US China rare earths deal effectively neutralizes these controls, which would have impacted global manufacturers using Chinese rare earth materials or technologies in their production processes outside China.
Market analysts had warned that China’s expanded controls could have created worldwide shortages similar to those experienced in April 2025, before previous agreements with Europe and the United States provided temporary relief. The US China rare earths deal prevents potential disruptions to the global rare earth market, which reached a value of $3.65 billion in 2024 and is projected to grow at a compound annual growth rate of 7.10% through 2032. With neodymium prices reaching 680,000 CNY per ton on October 30, 2025, the agreement provides crucial price stability for manufacturers dependent on these materials.
Future Implications and Annual Renegotiation Framework
- Trump announced plans to visit China in April 2026, with Xi reciprocating with a US visit later that year
- The agreement establishes annual renegotiation cycles, providing flexibility for both nations to adjust terms based on market conditions
The US China rare earths deal’s one-year duration reflects both leaders’ recognition that long-term agreements require gradual trust-building, particularly given the volatile nature of recent bilateral relations. Trump’s characterization of Xi as “a tremendous leader of a very powerful country” signals a diplomatic reset after months of increasingly hostile rhetoric from both sides. The annual renegotiation framework allows both nations to adjust terms based on evolving market conditions and technological developments, particularly as global demand for rare earths continues expanding rapidly in renewable energy and electric vehicle sectors.
Industry experts anticipate that the US China rare earths deal could catalyze increased American investment in domestic rare earth mining and processing capabilities, reducing long-term dependence on Chinese supplies. The agreement provides breathing room for US manufacturers to develop alternative supply chains while maintaining access to Chinese materials during the transition period. European Union officials have indicated readiness to use “all tools” in response to Chinese export controls, suggesting that the US China rare earths deal may influence broader international negotiations on critical mineral access. The deal’s success in preventing immediate supply disruptions demonstrates the continued importance of diplomatic engagement in managing economic interdependence between major powers.
Final Assessment: Diplomatic Success Amid Strategic Competition
The US China rare earths deal represents a pragmatic approach to managing economic competition between the world’s two largest economies, providing immediate relief from potentially catastrophic supply chain disruptions while establishing frameworks for ongoing dialogue. Trump’s enthusiastic assessment of the meeting as exceeding expectations suggests that both leaders recognize the mutual benefits of continued rare earth cooperation, even amid broader strategic rivalry. The agreement’s annual renegotiation structure acknowledges the dynamic nature of global rare earth markets while providing stability for manufacturers planning long-term investments in rare earth-dependent technologies. Most significantly, the US China rare earths deal demonstrates that despite escalating tensions across multiple domains, both nations retain the capacity for constructive engagement on issues of mutual economic interest.
