In a significant development for international trade, the United States and China have reached a one-year agreement concerning access to critical rare earth minerals. This agreement is a win for American industries that rely on these resources. This is particularly high priority in light of China’s stranglehold on the rare earth marketplace, where it currently produces roughly 60% of the world’s supply and controls close to 90% of processing capacity. This new trade agreement with China gives him the authority to import an additional 12 million metric tons of US soybeans this year. In this accord, China promises to buy no less than 25 million metric tons in the next three years.
The impetus for this agreement lies in the US’s significant dependence on Chinese rare earth minerals. Experts expect this dependence to continue for at least another handful of years. Dennis Wilder, a professor at Georgetown University, stated, “The U.S. is highly dependent and will be for a number of years still.” Developing a domestic supply of rare earth minerals in the United States would require five to ten years. This new time frame underscores the crucial nature of our relationship with China in this arena.
China had previously threatened to impose strict restrictions on rare earth minerals, which are essential for producing various technologies, including computer chips used in smartphones, artificial intelligence, and defense technology. Most recently, in December, China’s Ministry of Commerce announced an indefinite suspension of these restrictions, pushing back their enforcement. This move addressed concerns from US producers that similar restrictions would likely have a crippling impact on manufacturing and production capacity.
This agreement would go a long way in soothing the fears of US soybean farmers. They have been hit hard by the Trump Administration’s trade war with China. This Chinese uncertainty had sounded alarms about imminent price plummets for soybeans. Joe Janzen, an agricultural economist, highlighted the importance of the resolution: “There’s got to be a resolution to this conflict that means we shouldn’t see dramatically lower prices for soybeans.”
Even with the great progress of this agreement, there is still doubt about whether it will stick around. Kaiser Kuo, a prominent commentator on US-China relations, remarked, “Whether it will endure is yet to be seen.” China withheld immediate public praise following the landmark summit between President Trump and President Xi Jinping. This has left many experts understandably hesitant and reluctant to call for a top-line assessment. Alan Rozenshtein expressed this sentiment: “It’s been so chaotic that until there’s a signed piece of paper, somewhere I’ll wait to have an opinion.”
The details of the agreement started to trickle out during a time of increased hostility between the two countries. In the past, Trump’s administration was rightly criticized by American farmers who suffered fiscal damages from tariffs and trade barriers. The previously announced purchase commitments from China would be a welcome shot in the arm for US agriculture.
Dennis Wilder noted the potential consequences had China moved forward with its threatened restrictions: “If China had moved forward with the threatened restrictions, the policy would have hamstrung US production in key sectors.” This paints a picture of the vital importance of keeping access to these minerals as geopolitical turmoil increases.
While the two countries continue to work through this realignment, future negotiations are sure to be critical. Analysts emphasize that this deal provides much-needed relief and certainty in the short-term. Stakeholders need to be cognizant of the changing trade landscape.
