The US got a rare earths reprieve from China, but did not accept a setback

China has agreed to delay the implementation of the latest round of rare earths export controls as part of a deal struck between Presidents Donald Trump and Xi Jinping, but previous restrictions on critical minerals that have disrupted global trade remain.

Rare earths, 17 elements that play a small but important role in cars, airplanes and weapons, have emerged from obscurity and become China’s most powerful source of negotiating leverage thanks to export restrictions imposed this year that allow Beijing to cut off foreign customers who depend on Chinese supplies.

TRUMP SAYS RARE EARTH PROBLEM ‘SOLVE’

Trump and Xi met in South Korea for a nearly two-hour summit on Thursday, after which the US president said China had agreed to keep rare earth exports flowing and the issue had been “resolved”.

Shortly afterward China announced it would temporarily suspend export controls for a year that were imposed on October 9, when Beijing expanded its rare earths export regime to include new materials and rules, according to a release from the Ministry of Commerce.

However, the pause is likely to enforce restrictions imposed in April that control exports of seven rare earth metals and, in particular, rare earth magnets important to automakers, defense companies and chipmakers.

US Trade Representative Jamieson Greer, who also spoke aboard Air Force One on Thursday, said China would not implement its proposed rare earth controls. He did not mention the controls introduced in April.

It was the controls in April that, within weeks, caused shortages across the auto supply chain, forcing automakers to halt production at some plants.

China’s statement, which also included a promise to study and refine the plan, provides enough ambiguity and flexibility for Beijing to pursue a rare earths deal with the US, according to Tim Zhang, founder of Singapore-based Edge Research.

“Overall, we call it tactical stabilization at this point,” he said.

BATTERIES AND DIAMONDS

China’s export control announcement on October 9 also included new restrictions on electric battery equipment and industrial diamonds.

The battery restrictions sparked panic among some foreign customers of China’s world-leading battery sector, causing India’s Reliance Industries and other companies to rush overseas shipments ahead of an early November deadline.

It is unclear whether the commitment to halt action in October also covers the battery and diamond industries. China’s Ministry of Commerce did not immediately respond to questions from Reuters on the matter.
Source: Reuters