Marathon London talks deliver breakthrough as China agrees to supply critical magnets for electric vehicles and Trump opens doors to Chinese students
Breaking: Donald Trump has sensationally declared victory in his trade war with China, announcing a breakthrough deal that will see Beijing supply crucial rare earth minerals while America maintains crushing 55% tariffs on Chinese goods.
In a dramatic Truth Social post on Wednesday, the President revealed China would provide “full magnets, and any necessary rare earths” – critical components for everything from electric vehicles to fighter jets – while the US will permit Chinese students to attend American universities.
“Our deal with China is done, subject to final approval with President Xi and me,” Trump triumphantly announced. We are getting a total of 55 per cent tariffs, China is getting 10 per cent. Relationship is excellent!”
The stunning agreement emerged from two days of marathon talks at London’s ornate Lancaster House, with US Commerce Secretary Howard Lutnick declaring negotiators had put “meat on the bones” of last month’s Geneva agreement to ease bilateral retaliatory tariffs that had reached “crushing triple-digit levels.
China’s rare earth stranglehold broken
The deal represents a major victory for Trump in breaking China’s near-monopoly on rare earth minerals – the 17 metallic elements crucial for modern technology. Beijing controls 69% of global production and processes a staggering 90% of these critical materials.
China’s stranglehold has given it extraordinary leverage over the West, with a typical electric vehicle containing 550 grams of rare earths – nearly four times more than traditional petrol cars. The F-35 fighter jet requires over 900 pounds of the minerals, while a Virginia-class submarine uses around 9,200 pounds.
According to the U.S. Geological Survey, China controlled 69% of rare earth mine production in 2024, and nearly half of the world’s reserves.
The agreement comes after China imposed export restrictions on seven rare earth elements in April, threatening to cripple Western tech and defense industries. The minerals are essential for:
- Electric vehicle motors requiring powerful neodymium magnets
- Wind turbines using 80-200kg of rare earths per megawatt
- Missile guidance systems and military radar
- Smartphones, tablets and computer hard drives
Trump’s tariff triumph
The 55% figure Trump touted combines his baseline 10% “reciprocal” tariff on imports from most US trading partners, 20% on Chinese imports linked to fentanyl-related punitive measures, and pre-existing 25% levies from his first term, a White House official explained.
This represents a massive increase from the 2.5% average tariff rate when Trump took office – now standing at levels not seen since the catastrophic Smoot-Hawley tariffs of the 1930s that many economists blame for worsening the Great Depression.
Trump later posted: “President Xi and I are going to work closely together to open up China to American Trade. This would be a great WIN for both countries!!!”
Students for minerals swap
In exchange for the rare earth supplies, Trump agreed to reverse his recent crackdown on Chinese nationals at US universities – a move he said has “always been good with me.
The deal framework followed a rushed meeting in London starting on Monday, after a call last week between Trump and Xi broke a standoff that had developed weeks after their preliminary Geneva deal.
That earlier agreement had faltered over China’s continued restrictions on critical minerals exports, prompting Washington to respond with export controls on semiconductor design software, aircraft and other goods to China.
‘Handshake’ seals the deal
National Economic Council Director Kevin Hassett had told CNBC on Monday that US negotiators were seeking a “handshake” from China on rare earths after Trump said Xi had agreed to resume their flow.
“The purpose of the meeting today is to make sure that they’re serious, but to literally get handshakes… and get this thing behind us,” Hassett said. Our expectation is that immediately after the handshake, any export controls from the U.S. will be eased, and the rare earths will be released in volume.
Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer led the American delegation, while Chinese Vice Premier He Lifeng headed Beijing’s team at the talks.
Markets rally on relief
The agreement sparked immediate relief in global markets, which had been roiled by Trump’s escalating tariff policies. Since January, the administration has announced new or revised tariff policies more than 50 times – an unprecedented pace that left businesses reeling.
The preliminary Geneva deal in May had already triggered a global relief rally in stock markets, with US indexes recovering from near bear-market levels. The S&P 500, which had dropped nearly 18% after Trump unveiled his sweeping “Liberation Day” tariffs, has now recouped most losses.
China’s economic pain
The trade war has devastated China’s export-dependent economy. Customs data showed Chinese exports to the US plunged 34.5% year-on-year in May – the sharpest drop since February 2020 when COVID-19 upended global trade.
China dominates the global supply chain for rare earths, mining about 70% and refining 90% of the materials used to produce everything from wind turbines and defense equipment to electric vehicles.
Beijing had weaponized its rare earth dominance, with state media warning the export controls were not a “short-term bargaining chip” but aimed at preventing the minerals “from being used in activities that threaten international peace and security.
‘Excellent relationship’ despite tensions
Despite Trump’s declaration of an “excellent” relationship with Xi, deep tensions remain. The deal does little to resolve fundamental differences over Trump’s unilateral tariffs and longstanding US complaints about China’s state-led, export-driven economic model.
The World Bank on Tuesday slashed its global growth forecast for 2025 by four-tenths of a percentage point to 2.3%, warning that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.
Josh Lipsky of the Atlantic Council’s GeoEconomics Center noted the two sides left Geneva with “fundamentally different views” of their agreement and needed more specific actions.
Trump’s tariff whiplash continues
The president’s mercurial approach to tariffs has created unprecedented uncertainty. He recently doubled steel and aluminum tariffs to 50%, threatened a 50% levy on the EU, then backed down as his self-imposed negotiating deadlines approached.
Critics say the constant policy reversals undermine the goal of encouraging companies to invest in new US facilities. There are several things that even Trump haters have to respect, this limited progress,” said Michael Pillsbury, a China hawk advising Trump. It’s a big deal that China acknowledged it would do more.
Critical minerals race intensifies
The deal highlights the intensifying global race for critical minerals as the world transitions to clean energy. Rare earths are metallic elements used in the manufacture of catalysts for catalytic converters, magnets and robotic devices.
Western nations are scrambling to develop alternative sources, with Australia working to become the first significant dysprosium producer outside China. Brazil, Vietnam, and Malaysia are also developing rare earth capabilities, though experts warn it could take decades to break China’s dominance.
As one analyst put it: “China can influence global prices, supply availability, and really even the pace of green tech development.
What happens next?
While Trump declared the deal “done,” it remains subject to final approval between him and Xi. The framework sets the stage for more comprehensive negotiations, with an August 10 deadline looming from the Geneva agreement.
If talks fail, tariff rates could snap back from about 30% to 145% on the US side and from 10% to 125% on the Chinese side – a prospect that would send shockwaves through the global economy.
For now, Trump’s “Art of the Deal” appears to have delivered a rare earth victory – but at what cost to American consumers facing the highest tariffs in a century remains to be seen.
