US-China Trade Truce: Focus on Rare Earths and Chips
After two days of marathon negotiations in London, President Donald Trump announced a restored trade truce with China, pivoting on agreements to expedite rare earth exports and revisit US semiconductor export controls. The breakthrough marks a potential shift from the previous US policy of restricting advanced technology transfers to China.
Bilateral Deal Overview
The talks, held at London’s historic Lancaster House, revived the Geneva ceasefire that had stalled over Chinese quotas on rare earths and new US restrictions on chip design software. Key officials included US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and US Trade Representative Jamieson Greer meeting China’s vice premier He Lifeng and Vice Minister of Commerce Li Chenggang.
- Tariff Reductions: Both sides agreed to slash tariffs by 115 percentage points over a defined schedule.
- Rare Earth Exports: Beijing will supply specified annual quotas of neodymium, praseodymium, and dysprosium directly to US manufacturers.
- Semiconductor Controls: The US may ease export restrictions on 14 nm and older-node chips, pending final approval.
Technical Specifications of Rare Earths in Modern Electronics
Rare earth elements (REEs) such as neodymium (Nd), praseodymium (Pr), dysprosium (Dy), and terbium (Tb) are critical for high-strength permanent magnets used in electric vehicle motors, wind turbine generators, and high-performance hard disk drives. Typical NdFeB magnets require neodymium and praseodymium concentrations above 30 weight percent, with dysprosium and terbium added for thermal stability above 200°C.
“Securing a steady supply of NdPr and DyTb is paramount for next-generation EV powertrains and grid-scale renewable projects,” said Dr Anderson Lee, a supply chain analyst at Global Materials Insights.
Impact on Semiconductor Supply Chain and AI Hardware
US export controls since 2021 have targeted lithography and EDA tools for nodes at 7 nm and below, hindering Chinese fabs’ ability to produce cutting-edge processors. Under the tentative agreement, the US may grant licenses for 14 nm and 28 nm chips commonly used in AI inference accelerators, microcontrollers, and 5G baseband processors.
- Process Node Adjustments: Potential easing for 16 nm FinFET and 28 nm planar nodes.
- Design Software Licenses: Specific EDA tools for memory and analog design could be authorized.
- AI Hardware Impact: Chinese AI firms relying on TPU/GPU clusters could regain partial access to Nvidia and AMD inference chips.
“If implemented, this could alleviate bottlenecks in AI model training and inference capacity across Chinese cloud providers,” noted Maria Santos, CTO at QuantumAI Cloud Services.
Geopolitical and Strategic Implications
The revived truce underscores the strategic tug-of-war over critical minerals and advanced technology. The US Department of Energy’s recent $1.2 billion funding round for domestic REE processing facilities aims to reduce reliance on imports and diversify supply through recycling and alternative extraction methods, including ion adsorption clays.
Meanwhile China continues to invest in its downstream refining capacity, controlling over 70% of global neodymium and praseodymium processing. Analysts warn that any policy reversal could trigger a new cycle of decoupling in high-tech sectors.
Long-term Strategy for Rare Earth Independence
The US’ National Science Foundation has funded research into magnet recycling, direct alloy processing, and biomining. Strategies include:
- Expanding domestic mine output in Mountain Pass, California, and Alaska’s Bokan Mountain.
- Developing multi-element separation technologies using solvent extraction and ion-exchange resins.
- Scaling up industrial recycling programs for end-of-life electronics and EV motors.
Market Reaction and Next Steps
China’s CSI 300 index rose 0.8% on the news, while S&P 500 futures gained 0.4%. US federal appeals court rulings will also determine the fate of supplemental tariffs on European and North American trading partners.
Both governments plan to finalize the agreement within 30 days pending sign-off from President Trump and President Xi Jinping. Observers caution that implementation details and licensing procedures will ultimately decide the deal’s durability.