US-China Trade Truce Offers No Relief For Defense Supply Chains As China Links Rare Earths To Chip Export Curbs: Report
The renewed US-China trade truce reached in London left critical military-use rare earth export restrictions unresolved, threatening comprehensive deal prospects as global supply chain disruptions continue.
What Happened: Beijing has not committed to granting export clearance for specialized rare-earth magnets that US military suppliers need for fighter jets and missile systems, reported Reuters.
China’s negotiators appeared to link progress in lifting export controls on military-use rare earth magnets with longstanding US curbs on exports of advanced AI chips to China.
US officials signaled they are looking to extend existing tariffs on China for a further 90 days beyond the August 10 deadline agreed in Geneva, suggesting a more permanent trade deal is unlikely before then.
President Donald Trump called the London handshake deal “great,” while Treasury Secretary Scott Bessent said there would be no “quid pro quo” on easing AI chip export curbs for rare earth access.
China promised to fast-track approval of rare-earth export applications from non-military US manufacturers, with licenses having six-month terms. Beijing also offered to set up a “green channel” for expediting approvals from trusted US companies. Chinese rare-earth magnet producer JL MAG Rare-Earth obtained export licenses, including the United States.
However, China has not budged on specialized rare earths, including samarium, needed for military applications. The restrictions stem from Beijing’s April export controls that disrupted global supply chains after the Geneva tariff reduction agreement faltered.
China controls more than 70% of global rare-earth mining and over 90% of rare-earth alloy and magnet production. The country has granted temporary export licenses to suppliers of Detroit’s Big Three automakers, offering relief amid broader trade tensions.
See Also: White House Orders Scrutiny Of SpaceX Contracts Even As Trump-Musk Relationship Warms: Report
Why It Matters: China’s May customs data showed exports to the US plunged 34.5%, while overall exports rose 4.8% year-over-year, suggesting China redirected trade capacity away from the US market.
The unresolved rare earth dispute underscores the Trump administration’s challenges in securing comprehensive trade agreements given Beijing’s willingness to leverage critical mineral control.
Current US tariffs on Chinese goods remain at 30%, down from peak rates of 145%, while Nvidia Corp. (NASDAQ:NVDA) previously wrote off $5.5 billion in inventory and walked away from approximately $15 billion in sales due to chip export restrictions, with the company stating it remains “effectively foreclosed” from China’s $50 billion data center market.
The negotiations link rare earth mineral access with advanced AI chip export controls.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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