Donald Trump hails a step towards unlocking China’s rare earth exporting

The US and China have reached a new stage in their trade truce as the US seeks commitment on ending restrictions on rare earth exports that have roiled America’s advanced supply chains.

Donald Trump with US Secretary of Commerce Howard Lutnick, left, and Vice President JD Vance. ‘We just signed with China yesterday,’ Mr Trump said on Thursday. Picture: AFP

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Donald Trump has said the US and China had signed a trade agreement in what appeared to be another attempt to get Beijing to commit to end China’s export restrictions on rare earth minerals, which have roiled America’s advanced supply chains.

The American President’s comments on Thursday, Washington time, came two weeks after Trump officials said they had reached an understanding in London about how to implement a ceasefire in the countries’ trade dispute centred on tariffs, including a reprieve of China’s rare earths choke-hold.

“We just signed with China yesterday,” the President said at the White House on Thursday.

A White House official later clarified that the administration and China had “agreed to an additional understanding for a framework to implement the Geneva agreement”, citing an earlier round of talks with Chinese officials in May.

After those talks, held almost two months ago, the Trump administration also claimed Beijing had agreed to the resumption of rare earth magnets and raw rare earths to American businesses.

On Thursday, the White House official said the new understanding focused on “how we can implement expediting rare earths shipments to the US again”.

Asked about Mr Trump’s remarks on Bloomberg TV, US Commerce Secretary Howard Lutnick said the framework deal flowed from the London negotiations and had now been “signed and sealed”.

Mr Lutnick said that China was “going to deliver rare earths to us” and once they did that, “we’ll take down our countermeasures”.

Chinese officials had not commented on the latest iteration of the fragile trade truce as of Friday morning.

A Chinese port on the rare earths supply chain. Picture: supplied

American companies have complained that Beijing has continued to restrict access to rare earths, despite repeated claims that the restrictions have been lifted.

The Wall Street Journal this week reported that manufacturers have taken the continuing challenges as a sign that new Chinese rare-earth export restrictions were going to continue, despite assurances from the White House.

“It’s hand to mouth – the normal supply-chain scrambling that you have to do,” Lisa Drake, a vice-president overseeing American car maker Ford’s industrial planning for batteries and electric vehicles, told the Journal.

She said the situation had slightly improved, but said the scarcity of the rare earth magnets had forced Ford to “move things around” to avoid factory shutdowns.

Chinese authorities have used the new rare earths issuing regime to gather information about American, European and Japanese companies’ operations, including sensitive details such as contact information of those buying their magnets and even designs of how their magnets are integrated into components such as motors.

The rare earths restrictions have also crunched European manufacturers, creating a further diplomatic angst with Brussels.

Responding to those concerns, China’s commerce ministry this week said it had been “accelerating approval of rare earth export licences” for EU firms in “accordance with the law”.

“China stands ready to further enhance communication with relevant countries on export controls, actively facilitating convenient and compliant trade flows,” said ministry spokesman He Yadong.

The EU’s head of trade for China, Eva Valle Lagares, said it was “unclear” whether Beijing had “intentionally hit” Europeans businesses to “kill the chickens to scare the monkeys”, or whether it was an unintended by-product of its rivalry with Washington.

“In reality, it is probably a mix of everything. We are looking for a far more structural and reliable long-term solution,” Ms Valle said.

Australia and Canada have both announced measures to work with Europe and America to create non-Chinese supply chains of rare earths and critical minerals.

Former US deputy secretary of state Kurt Campbell said in an interview with Bloomberg this week that it would take “a generation” to diversify some of the US dependency on China for rare earths and other segments of global supply chains.

“It turns out that the effort to diversify, in terms of rare earths and other supply chains, is unbelievably difficult,” said Mr Campbell, one of the most influential advisers on Asia policy in the Biden administration.

Mr Campbell said while Beijing had the ability to hurt America, Washington also had numerous levers to inflict economic pain on China.

“There are certain areas where China could do enormous damage to American manufacturing and high-tech, but it’s also the case that the US can take actions that would really impact the Chinese economy,” Mr Campbell said.