US and China Reach Framework Agreement on Rare Earths Amid Trade Tensions

The United States and China have reached a "very substantial framework" agreement to address critical issues surrounding rare earth minerals and trade tariffs. U.S. Treasury Secretary Scott Bessent announced the development following discussions with Chinese Vice Premier He Lifeng in Kuala Lumpur.

The agreement aims to prevent the imposition of 100% U.S. tariffs on Chinese goods and to defer China's planned restrictions on rare earth exports. This framework sets the stage for further discussions between President Donald Trump and Chinese President Xi Jinping at the upcoming Asia-Pacific Economic Cooperation summit in South Korea.

In parallel, President Trump has signed multiple trade and mineral supply agreements with Southeast Asian nations, including Malaysia, Cambodia, Thailand, and Vietnam. These deals are designed to address trade imbalances and diversify critical mineral supply chains, particularly in response to China's tightening of rare earth export controls.

The agreements with Malaysia and Thailand include commitments to increase U.S. access to rare earths and to implement export rules favoring American buyers over Chinese companies. However, some of these agreements are non-binding memorandums of understanding, raising questions about their long-term viability amid potential political shifts in the region.

Experts caution that reducing dependence on China's rare earth supply will be a costly and time-consuming process. Patrick Schroder, a senior research fellow at Chatham House, noted that building new mines and processing facilities in regions like Australia, the United States, and Europe involves higher capital costs, stricter environmental regulations, and more expensive labor and energy inputs compared to China.

The United States has also secured a critical minerals partnership agreement with Australia, committing at least $1 billion each toward projects worth $8.5 billion over six months. This deal is seen as a significant shift in economic alliances, aiming to counter China's dominance in the rare earths market.

Despite these efforts, China continues to control approximately 70% of rare earth processing globally. Achieving a diversified and secure supply chain will require substantial investment, strong environmental regulations, and technical expertise, with new processing plants potentially taking years to become fully operational.