China's Rare Earth Advantage: Trump-Xi Meeting and Trade Dynamics

Trade Truce and Tariffs

• 🤝 A tariff truce is likely between China and the USA, with Trump not imposing the threatened 100% tariffs and China halting recent rare earth restrictions for about a year.
• ⚖️ However, existing tariffs remain: the US has tariffs upwards of 50% on China, and China has tariffs of about 30% on the US.

China's Rare Earth Dominance

• 🌍 China dominates nearly every aspect of rare earths, including reserves, mine production, and refined production of heavy rare earths and magnets.
• 💡 This dominance gives China a strong point of leverage over the US and other countries, which they are unlikely to relinquish.
• 💰 China may seek reciprocal unwinding of US export controls on advanced technology and semiconductors in exchange for easing rare earth restrictions.

Trump's Asia Trip and Trade Deals

• ✈️ Donald Trump's trip to Asia includes a crucial meeting with China's President Xi in South Korea.
• 🇺🇸 Trump secured a $550 billion investment pledge from Japan in exchange for respite from import tariffs.
• 📈 The meeting is expected to yield a deal on TikTok, increased soybean purchases by China (politically important for Trump's base), and progress on fentanyl precursor exports.

Geopolitical and Economic Considerations

• 🤝 The Chinese leadership views Trump as transactional, welcoming his lesser concern for fundamental issues like human rights.
• 🇹🇼 Beijing may also welcome potential flexibility from Trump regarding US support for Taiwan.
• ⚠️ Despite the trade truce, China can continue to exert leverage through other means, such as slow-walking export permits for rare earths.