Trump announces breakthrough trade deal with China; Beijing to supply ‘magnets, rare earths’

President Donald Trump on Wednesday said a trade agreement was reached between the US and China, pending final approval from him and Chinese President Xi Jinping. The announcement follows weeks of escalated tensions between the two countries and two days of intense trade negotiations. Central to the deal is China’s commitment to supply essential magnets and any necessary rare earth materials to the United States, a critical issue that had previously stalled talks in London.

According to Donald Trump's statement, the US will, in return, permit Chinese students to continue their studies at American colleges and universities, a move welcomed by both sides. 

However, the agreement remains subject to final approval by President Trump and Chinese President Xi Jinping.

“Our deal with China is done, subject to final approval with President Xi and me. Full magnets, and any necessary rare earths, will be supplied, up front, by China. Likewise, we will provide to China what was agreed to, including Chinese students using our colleges and universities (which has always been good with me!). We are getting a total of 55% tariffs, China is getting 10%. Relationship is excellent! Thank you for your attention to this matter!” Trump wrote on Truth Social.

US-China trade tensions: A renewed clash in Trump’s second term

Since President Donald Trump’s second inauguration on January 20, US-China trade relations have sharply deteriorated, reigniting a fierce trade war. 

Early in April, Trump unveiled his “Liberation Day” tariffs, imposing an additional 34 per cent tariff on Chinese imports, pushing the total tariff burden on Chinese goods to 54 per cent. 

China swiftly retaliated with matching tariffs on US products, including a 34 per cent levy and new export controls on rare earth minerals—vital to high-tech industries. 

The tit-for-tat escalations intensified rapidly, with tariffs soaring to as high as 125 per cent on both sides, severely disrupting global supply chains and increasing economic uncertainty worldwide.

Why rare earths are a strategic battleground

Rare earth elements have become a critical flashpoint in this trade conflict. These minerals are essential for manufacturing electric vehicles, semiconductors, defence systems, and other advanced technologies. China dominates about 90 per cent of the global rare earth supply and refining capacity, giving it significant leverage. 

In early 2025, China imposed strict export controls requiring licences for rare earth shipments, disrupting supply chains and forcing some US manufacturers, including Ford, to halt production temporarily. 

This move underscored the strategic vulnerability of US industries reliant on these materials, making rare earth access a key focus in trade negotiations.

The recent US-China trade agreement includes China’s commitment to resume supplying rare earths and magnets to the US market, easing a major bottleneck for American industries and defence contractors. 

US Commerce Secretary Howard Lutnick expressed optimism that resolving the rare earth issue would help stabilise trade talks and reduce economic uncertainty. 

Importance of student exchanges in US-China ties

Educational exchanges have long been a vital pillar of US-China relations, fostering cultural understanding and economic benefits. 

Chinese students represent one of the largest groups of international students in the US, contributing around $14 billion annually through tuition and living expenses, according to US government data. 

Notably, Chinese President Xi Jinping’s daughter, Xi Mingze, reportedly studied at Harvard University.

The Chinese government has also promoted programmes encouraging American students to study in China to deepen mutual understanding. 

However, rising political tensions and visa restrictions have caused uncertainty and declining enrolment, threatening these benefits. 

The recent trade deal’s provision to allow Chinese students to continue their studies in the US is seen as crucial for maintaining these people-to-people connections, which underpin broader diplomatic and economic relations between the two countries.