China pauses rare earth export controls after Trump-Xi trade truce

China has agreed to pause sweeping export controls on rare earth elements for one year following a high-stakes meeting between President Xi Jinping and United States President Donald Trump in Busan, South Korea — a truce that has temporarily eased tensions in the world’s most consequential trade rivalry.

Trump said he had agreed with Xi to reduce tariffs on Chinese imports to 47 per cent from 57 per cent in exchange for Beijing keeping rare earth exports flowing, resuming purchases of US soybeans, and intensifying efforts to curb the illicit fentanyl trade, according to news agency Reuters.China’s Commerce Ministry confirmed the pause, saying it would last for one year.

The deal, which Trump called “an amazing meeting,” also includes a US pledge to delay new restrictions that would have barred Chinese companies from receiving US technology if linked to sanctioned entities. Washington will likewise suspend for a year certain measures targeting China’s maritime logistics and shipbuilding sectors, Reuters reported.

The agreement follows weeks of escalating brinkmanship that had rattled global supply chains. Earlier this month, Beijing shocked markets by announcing export restrictions on rare earth minerals — elements crucial to the manufacture of smartphones, fighter jets, semiconductors and electric vehicles.

The Washington Post reported that the move was a display of economic coercion aimed at forcing Washington to ease trade and technology controls, underscoring Xi’s growing confidence and willingness to use China’s dominance in critical minerals as leverage.

China controls around 70 per cent of global rare earth production and nearly 90 per cent of processing capacity. The restrictions, as initially announced, would have extended Beijing’s reach beyond its borders by requiring foreign companies to seek approval if their products contained even trace amounts of Chinese raw materials — a measure analysts described as potentially far-reaching and disruptive, according to The Washington Post.

Under the truce, Trump said the rare earths agreement will be “very routinely extended as time goes by” and suggested it could remain in place “long beyond the year,” news website CNBC reported. The president added that the United States would postpone implementation of rules blacklisting subsidiaries of Chinese companies and suspend for one year port fees on ships docking in each other’s ports.

While the immediate outcome has averted a deeper economic rupture, analysts cautioned that Beijing appears to have outmanoeuvred Washington. “Xi was ready for Trump in his second term and has a powerful weapon in rare earths,” CNBC quoted analysts at multinational investment bank Piper Sandler as saying. 

Still, experts warn the truce remains fragile. Former US ambassador to China Nicholas Burns told CNBC that the deal represents “an uneasy truce in a long, still simmering trade war.” China’s Ministry of Commerce has avoided detailing specific commitments on agricultural or energy purchases, saying only that the two countries had agreed to “expand agricultural trade.”