(Zero Hedge)—Two weeks after a sudden flareup over Chinese rare earth mineral exports nearly sparked another market meltdown, the issue has been resolved, at least according to the Trump admin.
According to a fact sheet published by the White House on Saturday which outlined some details of the trade pact agreed to earlier this week by President Trump and Chinese leader Xi Jinping, China will effectively suspend implementation of additional export controls on rare earth metals and will issue general licenses valid for exports of rare earths, gallium and germanium “for the benefit of U.S. end users and their suppliers around the world” meaning the effective removal of controls China imposed in April 2025 and October 2022. The US and China previously said Beijing would suspend more restrictive controls announced in October 2025 for one year.
Washington will also pause some of Trump’s so-called reciprocal tariffs on China for an additional year and is halting plans to implement a 100% tariff on Chinese exports to the US that was threatened for November. The White House also said that the US will further extend the expiration of certain Section 301 tariff exclusions, currently due to expire on Nov. 29, 2025, until Nov. 10, 2026.
Meanwhile, China will also terminate investigations targeting US companies in the semiconductor supply chain, including those into Nvidia and Qualcomm, Bloomberg reported.
However, skepticism emerged about the viability of the deal after comparing the readouts of what the White House said was agreed to, and that published by Beijing: what emerges are several key disagreements, prompting some China experts to conclude that “there is no deal” and that “we’re going to be doing this again in 1-2 months.”
First pic is what USA said China agreed to do
Second and third pics are what China said about the meeting
Doesn’t seem like there is a consensus https://t.co/VcvV7uV21f pic.twitter.com/GFRsDqZYd6
— molson 🧠⚙️ (@Molson_Hart) November 2, 2025
It also means that even a small hiccup in the already tense relations between the two countries likely means a reversion to the trade war status quo, threats of more tariffs by the US and rare earth retaliation by Beijing.
To that point, Treasury Secretary Scott Bessent said Sunday that despite deals, the US and its allies need to be wary of China.
“This is a problem that has been with us for several decades, it’s never been addressed with these rare earths, the rare earth magnets,” Bessent said on Fox News Sunday. “The Chinese have cornered the market, and unfortunately, at times, they proved to be unreliable partners.”
Bessent added that he hoped “we can depend on them to be more reliable partners” after the implementation of the deal.
The grumpy old men at The Wall Street Journal’s editorial board think China’s rare earth restrictions were a surprise.
China has been planning this for 30 years while the U.S. was asleep at the switch.
We’re wide awake now, rallying our allies and de-risking global supply… pic.twitter.com/fjkoRuY8bI
— Treasury Secretary Scott Bessent (@SecScottBessent) November 2, 2025
Later on Sunday, Trump appeared on 60 Minutes after a 5 year hiatus, and said that “I got sort of everything that we wanted,” of his meeting with Chinese President Xi Jinping.
“I mean, we’re doing very well with China, and hopefully they’re gonna do very well with us,” adding that China’s threat of rare earths restrictions has “gone.”
The grumpy old men at The Wall Street Journal’s editorial board think China’s rare earth restrictions were a surprise.
China has been planning this for 30 years while the U.S. was asleep at the switch.
We’re wide awake now, rallying our allies and de-risking global supply… pic.twitter.com/fjkoRuY8bI
— Treasury Secretary Scott Bessent (@SecScottBessent) November 2, 2025
Many hardly share Trump’s view, noting that the deal at most gives the US a 1 year period in which to launch an Operation Warp Speed 2.0 (see below) in which to boost domestic production and reroute supply chains in order to make the US self-reliant on rare earths, a massive challenge in a world where China is the defacto sole-source of refined RE.
The landmark summit between Trump and Xi, their first face-to-face meeting of the US president’s second term, saw the leaders stabilize relations in the short term after an escalating trade fight that had roiled markets and sparked fears of a global downturn.
Under their agreement, according to the White House, China agreed to pause sweeping controls on rare-earth magnets in exchange for a US agreement to roll back an expansion of curbs on Chinese companies. China had used its dominance in the processing of rare-earth minerals as leverage, threatening to restrict their flow to the US and allies countries.
The US also agreed to halve a fentanyl-related tariff to 10% from 20%, while Beijing will resume purchases of American soybeans and other agricultural products. The US has said China will buy 12 million metric tons of soybeans during the current season, and a minimum of 25 million metric tons a year for the next three years. Trump on Friday indicated he would like to remove all of the fentanyl-related tariffs if China continued to crack down on exports of the drug and precursor chemicals used to make it.
“As soon as we see that, we’ll get rid of the other 10%,” Trump told reporters aboard Air Force One on Friday.
The US also said on Saturday that Beijing will take steps to allow the Chinese facilities of Dutch chipmaker Nexperia BV to resume shipments, confirming a Bloomberg report from a day earlier. This move will likely ease worries about chip shipments that had threatened auto production as a trade fight between China and the US escalated.
But as Bloomberg notes, while the agreement has calmed tensions, the pact may be a short-term truce in an extended trade fight with the measures just meant to last one year. And despite addressing some key issues – and with both sides winning key concessions – the agreement fails to comprehensively address all of the issues at the heart of the US-China trade fight and other geopolitical flashpoints such as Taiwan and Russia’s war in Ukraine.
According to an analysis by TS Lombard’s Grace Fan (available to pro subs), amid Trump’s flurry of Asia dealmaking, capped by a fresh US-China trade war détente, “the spectre of escalation remains bracingly in view, after Trump unexpectedly threw open the door to new US nuclear weapons testing for the first time in three decades to counter Russia/China.”
That said, investors can take comfort in the détente’s ‘deliverables’ as keeping a risk-on market rally on both sides of the Pacific alive, including: 1) A 10% cut in US tariffs on China aided by Chinese purchases of US soy (+25mmt/yr for 3 yrs); 2) a 1-year delay to both the expanded Chinese 9 Oct rare earth (RE) and the US 29 Sept (“Affiliates”) export controls rules; and 3) a 1-year delay of new bilateral shipping fees. Left out was Taiwan, TikTok and Nvidia’s Blackwell chips, suggesting more market upside when and if a latter deal ultimately gets greenlit as we expect.
Fan notes that aided by his Rare Earths trump card, Xi scored two big wins:
- Delayed US “Affiliates Rule”. This is one of the first known instances of China successfully rolling back a major US chip export control expansion but likely not the last. In a big shift owing to Trump’s transactionalism, US national security is now on the bargaining table in a way it never was before. An estimated 20,000 affiliates at least 50% owned by Chinese blacklisted entities and caught in the rule’s dragnet could be let off (e.g., Dutch-based chipmaker Nexperia), easing recent supply chain constraints for automakers among other firms.
- Immediate 10% fentanyl tariff cut = more level playing field with ASEAN. China’s now lower tariff rate (+20% under Trump 2.0) puts it back in competition with regional exporters, making ASEAN (led by Vietnam) the relative loser here (with +19-20% “reciprocal” tariffs, +40% for transshipments). Still, keep an eye on Trump’s two recently finalized trade deals (Malaysia, Cambodia) plus “framework” agreements (Vietnam, Thailand) as new details are fleshed out.
Trump’s consolation prize are the new RE alliances plus soy purchases. According to TS Lombard, saddled by Beijing’s April 4th Rare Earth export controls, the US is arguably in a worse position now vs pre-Liberation Day. Yet Trump’s flurry of RE deals this week (Japan, Korea, Malaysia, Thailand) offers hope that a valuable lesson may have been learnt: the only way out of the RE trap is working with allies on ‘Operation Warp Speed’ 2.0. Trump’s go-ahead for Seoul to build nuclear-powered submarines at a Philly shipyard and clarity on Korea’s $350bn FDI ($150bn for shipbuilding; US$200bn in cash capped at US$20bn/year) also sets the stage for more US reindustrialization – so long as visas are granted.
All this keeps Trump on track for trade war de-escalation by year-end in time for the 2026 midterm election countdown in our base case. What’s still missing: a lot of fine print, USMCA renegotiations, resolution of the Brazil/India 50% tariff disputes and the looming Supreme Court tariff ruling (oral hearing: 5 Nov) that could scramble, however temporarily, Trump’s game plan.
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