Highlights

• The U.S.-China rare earth 'deal' is a temporary six-month truce.
• The deal does not fundamentally change China's control over 85-90% of global rare earth processing.
• Beijing maintains leverage by imposing strict export conditions.
• China requires extensive documentation for rare earth exports.
• Military-grade rare earth elements are kept off-limits by China.
• Experts argue for a comprehensive, whole-of-government critical minerals strategy for U.S. industrial and defense independence.

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A much-touted U.S.–China rare earth“deal” is actually a temporary six-month truce that may ultimately merely restore the status quo before President Trump’s April tariff escalation. China’s leverage remains intact, with Beijing imposing strict conditions (and gathering intel) on rare earth exports while controlling ~90% of processing capacity. Rare Earth Exchanges (REEx) reports directly that Chinese information processing may amount to industrial espionage.

A “Great Deal” or Just a Temporary Truce?

President Donald Trump is trumpeting a “great deal” with China on rare earth elements, even boasting “we have everything we need” from the handshake arrangement as cited (opens in a new tab) by Reuters. In reality, this deal is a fragileframework – not a binding trade treaty – that lasts just six months and lax enforcement mechanisms or detailed commitments as reported by Rare Earth Exchanges (REEx)

It essentially presses pause on the recent trade hostilities, rather than delivering any lasting resolution. Investors and analysts warn it’s more of a tactical timeout than a true breakthrough.

Beijing’s Conditions: Licenses, Limits, and Leverage

Under the new framework, Beijing agreed to expedite approvals for rare earth export licenses that meet its criteria, but on Beijing’s terms. Any approved export licenses will be time-limited to six months, after which China can re-tighten the tap.

 The recent trade agreement between China and the U.S. signed in London does not explicitly exclude military-use rare earth inputs, such as samarium, from its scope. While the agreement is designed to accelerate Chinese approvals for rare earth exports to the United States—thereby easing some trade tensions—it notably avoids addressing or exempting specialized materials critical to defense applications. In effect, the deal focuses on streamlining commercial shipments rather than resolving deeper concerns over access to strategic military-grade rare earths.

So the temporary deal leaves inputs for military applications up in the air (opens in a new tab) involving the fast-track export channel. In fact, Chinese negotiators in London refused to budge on specialized rare earth magnets used in fighter jets and missiles – those remain off-limits unless the U.S. eases its own tech export curbs. The upshot: U.S. automakers and electronics firms might see some relief, but defense contractors are still effectively cut off from Chinese rare earth supplies.  And remember certain heavy rare earth elements needed for military applications are 99%+ derived from China.

What About the Fine Print?

China’s fine print further underscores who’s in control. In April, Beijing imposed a new “dual-use” export licensing regime for critical minerals, forcing Chinese suppliers to seek approval for each shipment and submit extensive documentation on the intended end-use and buyers.

Companies report they must divulge highly sensitive technical details – such as magnet designs and customer information, including supply chain intelligence– to obtain export clearance.

 One industry insider communicated with REEx on condition of anonymity, likening these requirements to industrial espionage by paperwork, as Beijing gathers commercial intel under the guise of compliance. Despite Chinese officials insisting they are “speeding up” license approvals for “compliant” applications, many Western firms still struggle to secure supplies. Simply put, China’s bureaucracy can still stall or deny exports at will, especially if a buyer refuses to hand over proprietary data.

“Liberation Day” to London: How We Got Here

This rare-earth truce comes after months of escalating trade salvos. In early April, Trump declared “Liberation Day,” imposing sweeping reciprocal tariffs on China, which Beijing answered by virtually halting rare earth exports. Since China dominates the rare earth supply chain, accounting for roughly 85–90% of global rare earth refining capacity, its embargo immediately sent U.S. manufacturers scrambling for alternatives.  REEx inside source informed us that President Trump ordered his trade delegation to accelerate the Chinese meeting. A tentative tariff truce struck in Geneva, Switzerland, in May quickly fell apart when China failed to resume shipments of the critical minerals, deepening U.S. frustration.

Only after a marathon meeting in London in June did negotiators revive the handshake agreement, with China ostensibly agreeing to “accelerate” rare earth exports and the U.S. offering modest concessions (such as easing certain tech export curbs and visa restrictions) as we were informed at REEx.

Even so, on-the-ground reality remains harsh. Western industries remain on edge, as Chinese rare earth magnet exports have trickled out far more slowly than initially promised. In May, China’s shipments of rare earth magnets to the U.S. reportedly declined markedly year-over-year, despite the deal.

Automakers, clean energy companies, and defense suppliers find themselves “living hand-to-mouth,” scrambling to redesign products or pay premium prices to keep production lines running. As one U.S. importer put it, keeping factories open has become an expensive game of “limping along” week-to-week.

China’s Rare Earth Monopoly Remains Unshaken

From an investor’s perspective, the rare earth ceasefire is a relief, but a temporary one. Analysts note that the framework barely addresses the core problem: China’s stranglehold on these strategic materials. Beijing still enjoys a virtual monopoly over rare earth refining and magnet production, a position it has proven willing to exploit for its own benefit. The current agreement, described even by insiders as an “armistice, not a treaty,” has a short shelf-life and no binding enforcement, as we have covered at REEx.

Yes the deal buys time (and a bit of goodwill) through early autumn but leaves Washington’s fundamental vulnerability intact.

It leaves America and the West in a challenging position.  While POTUS continues to declare success, according to one subject matter expert on condition of anonymity, “private investment is not where it needs to be due to risk exposure.”

In effect, China is still in the driver’s seat. By dangling partial access to rare earths, Beijing achieved a pause in U.S. tariff pressure without relinquishing its long-term leverage. As Trump celebrates a deal “done,” experts caution that this is not a true supply chain solution – it’s a precarious pause in a continuing battle. Real relief will come only when the U.S. and its allies reduce their dependence on China’s rare earth processing – a daunting task years in the making. Until alternative refining capacity comes online, Beijing holds the high ground in any rare earth showdown. In short, the rare earth saga isn’t over – and China knows it.

In short, China holds the high ground—and they know it. The so-called “pause” in rare earth tensions is not a solution; it’s a geopolitical illusion. If the United States is serious about energy security, industrial independence, and military readiness, then a comprehensive policy for rare earth and critical minerals is not optional—it’s existential.

It cannot be piecemeal or pegged to market whims. It must be aggressive, whole-of-government, and unapologetically strategic, covering multiple friendly nations.

We don’t need more incentives buried in trade bills—we need a Critical Minerals Czar with the authority, budget, and mandate to drive coordination across the entire supply chain in collaboration with nations around the world: from exploration and extraction, to refining and separation, to magnet manufacturing and finished goods integration. This includes funding for university R&D programs, trade school pipelines, recycling innovation, and substitution technologies such as non-rare-earth permanent magnets. Without this full-spectrum policy, America will remain exposed, reactive, and one Beijing export control away from another manufacturing crisis.

This isn’t a “nice to have.” It’s a must-have. And it should have been in the Big Beautiful Bill. If we don’t act now, we may not get another chance to build resilience before the next disruption hits.