The world's two biggest economies have managed to hash out their trade differences… for now.
What happened: The U.S. and China struck a new deal that restores rare earth exports to the States and reinstates student visas for Chinese nationals. As part of the agreement, the U.S. will apply a 55% tariff on Chinese imports — down from as high as 145% — while Beijing will keep 10% tariffs on goods from the U.S.
Catch-up: The two sides cut a similar deal last month, but it quickly unravelled after the U.S. accused China of slow-walking shipments of rare earth materials and magnets, which are used for everything from fighter jets to pharmaceuticals.
- But, as rare earth supplies dried up and some automakers had to halt production, Western governments scrambled to find alternatives.
- With few options, the White House blinked, reportedly asking Beijing to come back to the negotiating table.
Why it matters: The showdown was a demonstration of China’s leverage in trade spats, with its dominance of rare earths serving as a major trump card (pun intended) that it always has in its back pocket.
- Some experts warn that Beijing will have this playbook ready to go the next time tensions arise, whether it's with the U.S. or another country.
Big picture: China handles nearly 90% of the processing and refining for the world’s rare earth minerals. While Canada and other Western countries are trying to cut into that dominance, building an entire domestic rare earth supply chain is difficult, slow, and expensive.—LA