The People’s Republic may ease its export restrictions after the two countries reached a framework agreement in their ongoing trade dispute. Impact on other countries remains unclear.
Will China soon resume larger shipments of rare earths and magnets to the U.S.? Although the export restrictions imposed in early April apply globally and have already caused production disruptions, the situation may ease—at least in the U.S. market. According to media reports, government representatives from both countries agreed on Tuesday to relax these trade restrictions. In return, the U.S. is expected to lift some of its export controls on certain strategic goods and software, which had been imposed in response. The agreement was reached after two days of negotiations in London.
The talks were preceded by a meeting in Geneva last month, where both parties had agreed to temporarily reduce mutual punitive tariffs. However, reports indicate that disagreements remained on several key issues. From the U.S. perspective, the lifting of China’s rare earth restrictions was part of the Geneva deal. When exports in this product category remained heavily limited, the U.S. responded with the aforementioned measures.
A rare phone call between Presidents Donald Trump and Xi Jinping later paved the way for the recent agreement in London. The proposal will now be submitted to both leaders for final approval, U.S. Commerce Secretary Howard Lutnick told reporters. A more comprehensive agreement is to be negotiated by August 10.
Shortly after the conclusion of the London negotiations, Chinese rare earth magnet producer JL Mag Rare-Earth announced it had received export licenses for shipments to the U.S., among others—something Bloomberg interpreted as a possible sign of easing tensions between Beijing and Washington.
No Sign of a Fundamental Resolution to the Trade Conflict
According to Reuters, however, there are no indications of a lasting resolution to the long-running trade conflict. In this context, the U.S. had already restricted China’s access to advanced chip technology in 2022 (we reported). One of the more recent escalations in the trade war was China’s explicit export ban on critical minerals such as gallium and germanium to the U.S. Like rare earths, these metals are predominantly produced in China and play an essential role in both civilian and military applications.
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