Trump’s crowing over a new deal is more hype than reality in 3 ways.

Trump’s Claim

Truth Social: 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!

For starters, gloating before a deal is even signed is ill-advised because Xi won’t like being mocked. It could kill a deal or more likely Xi will just ask for more concessions.

Second, China’s tariffs on US products are about 33 percent according to the Peterson Institute for International Economics, not the 10 percent Trump claimed.

Third Trump failed to note the agreement is for six months and is yet to be signed.

When the story broke at 6:04 AM yesterday, I figured there was more to it. By 5:10 PM the story had changed significantly from Trump’s “Truth”.

The remarkable thing about this "deal" is that it just restores things to the pre-Liberation-Day status quo, except both sides have imposed an extra 10% tariff on each other (which is not good). So all that blather about "isolating China" turned out to be just empty talk. pic.twitter.com/11UCnt7dVy

— James Surowiecki (@JamesSurowiecki) June 11, 2025

Six-Month Limit on Its Ease of Rare-Earth Export Licenses

The Wall Street Journal reports China Puts Six-Month Limit on Its Ease of Rare-Earth Export Licenses

China is putting a six-month limit on rare-earth export licenses for U.S. automakers and manufacturers, according to people familiar with the matter, giving Beijing leverage if trade tensions flare up again while adding to uncertainty for American industry.

Beijing’s agreement to temporarily restore rare-earth licenses was one of the key breakthroughs in the latest round of intense trade talks in London, but the six-month limit illustrated how each side is retaining the tools to easily escalate tensions again.

In exchange for the Chinese easing rare-earth curbs for now, the people said, U.S. negotiators agreed to relax some recent restrictions on the sale to China of products such as jet engines and related parts, as well as ethane, a byproduct of natural gas and oil drilling important in manufacturing plastics.

Details of the framework to uphold an interim agreement forged in Geneva last month are still being worked out, the people said. The White House declined to comment.

According to people who consult with Chinese officials, Beijing wants to retain its chokehold on the critical minerals to give it valuable ammunition for future negotiations.

China’s grip on rare-earth exports has become a key point of leverage for Beijing in trade negotiations with the U.S. In the wake of the trade truce in Geneva in mid-May that was expected to ease the flow, Washington accused Beijing of slow-walking export licenses. Beijing, in turn, blamed the Trump administration for undermining the Geneva agreement.

The trade war between Washington and Beijing has in recent weeks veered away from tariffs and toward each country’s restrictions on materials or products the other desperately needs. But what to do about tariffs is likely to play a larger role in coming talks.

Maintaining Leverage

Also consider China’s Lock on Rare Earths Dictated Path Toward Trade Truce

China’s chokehold on supplies of minerals essential to high-tech goods from electric vehicles to jet fighters has become a formidable advantage in trade negotiations with the U.S.

President Trump said Wednesday that the U.S. and China had agreed on terms for a truce on trade. The framework for the deal, which officials from the U.S. and China negotiated over two days in London this week, hinged on access to China’s exports of rare-earth magnets, coin-size components that are indispensable for powering car motors, industrial robots and missile-guidance systems.

The deal appears to allow China to maintain an export-control system for rare earths established in April after Trump heaped extra duties of 34% on Chinese products. That would allow Beijing to clamp down on supplies again in the future. And licenses for U.S. manufacturers to import rare earths from China would have a six-month limit, people familiar with the deal said.

“China’s going to want to maintain leverage,” said Gracelin Baskaran, director of the critical minerals security program at the Center for Strategic and International Studies in Washington. China’s dominance “puts American companies at direct risk given that any sort of agreements that have been made can be reneged on,” she said.

In April, Elon Musk said China’s magnet restrictions could interfere with production of Tesla’s Optimus humanoid robots. Ford said it had stopped production of its Explorer SUV at its Chicago plant for a week in May.

New export licenses were issued in limited quantities to some Chinese magnet companies for certain non-U. S. clients including Volkswagen, and even some U.S. companies, people familiar with the matter said, but many companies around the world struggled to get enough magnets.

MP Materials, the dominant U.S. producer of rare earths, has a heavy-rare-earth plant coming up in California and expects to begin commercial production of magnets by the end of the year at its factory in Texas. MP has an agreement to sell magnets to General Motors.

Magnets are the shortage story of the day. However, this goes far beyond magnets.

A third article explains Supply Chains Become New Battleground in the Global Trade War

Today, instead of warheads, the U.S. and China are wielding a range of new economic weapons that have the potential to cause widespread economic pain. Following the latest skirmish, China agreed to resume exports of rare-earth magnets and critical minerals needed by U.S. companies—but only for six months.

“If you look at traditional arms-control treaties, the primary goal was to prevent a catastrophic, worst-case scenario from materializing,” said Emily Benson, head of strategy at the advisory firm Minerva Technology Futures and a former Commerce Department official. “And that’s certainly what we see here in the economic domain.”

In many essential sectors of the modern economy, China has the upper hand. The world’s second-largest economy accounts for around a third of global manufacturing output, giving it a potential chokehold on auto parts, basic ingredients for drugs, key parts of the electronics supply chain and a host of other industrial sectors. It is the world’s No. 1 exporter of machinery, ships, steel, ceramics, textiles and dozens of other goods, according to data from the International Trade Center, a U.N.-backed agency that promotes open trade.

The U.S. dominates fewer sectors—but its clout in advanced technology gives it an outsize advantage.

Under the Biden administration, the U.S., which for years made abundant use of its dominant position in global finance to impose sanctions on countries including Iran and Russia, wielded one of the most powerful economic tools America possesses: its tech prowess. 

In response, China has begun flexing its own economic muscle by tightly controlling the export of rare earths and other critical minerals that are essential for the manufacture of car engines, chips, smartphones and a host of other advanced technologies. It upped the ante this year by extending those controls to the export of rare-earth magnets, indispensable components in everything from air-conditioning units to jet fighters. 

China’s move to put a six-month limit on rare-earth export licenses for American manufacturers signals that Beijing could use this weapon against the U.S. if trade tensions erupt again. 

The potential for export controls to disrupt trade adds to the pressure on companies already struggling to navigate tariffs and mushrooming trade conflicts. Companies operating in the U.S. and China will increasingly need to split their supply chains into two, said Eric Zheng, president of the American Chamber of Commerce in Shanghai. 

China Found World’s Pain Point on Trade — and Will Use It Again

Bloomberg reports China Found World’s Pain Point on Trade — and Will Use It Again

With US tariffs soaring to 145% and the Trump administration boasting that it had the upper hand with China, Beijing turned the tables, essentially shutting down exports of one thing the modern world can’t function without: rare earth magnets.

As slowing deliveries of products with obscure elements like dysprosium and terbium began to pinch industries from autos to defense, the US and other nations quickly hit their pain threshold. Ford Motor Co. and Suzuki Motor Corp. idled some production, Elon Musk said shortages were hurting his robotics business and governments rushed to secure the few suppliers outside of China. A two-way trade spat became a global crisis.

Major questions remain. Commerce Secretary Howard Lutnick said he thinks the London deal will be approved within days and that he didn’t expect a written version of the pact to be released, meaning it could be tough to know exactly what both sides agreed to beyond general outlines.

“They might well be restarting enough of the export licenses so that the commercial buyers can get what they need,” said Arthur Kroeber, partner and head of research at Gavekal, an independent research firm, who has written about China for more than three decades. “But they are not going to issue enough licenses so that people can stockpile. They are not going to give up their leverage.”

“While the U.S. appeared to take the lead in reviving trade talks, China may have quietly secured the upper hand,” said Hebe Chen, an analyst at Vantage Markets in Melbourne. China “weaponized its dominance in rare earths to shift the negotiating balance,” she added.

In the latest flare-up, bottlenecks emerged when China slowed approvals for products — mainly magnets — containing even miniscule amounts of seven rare earths, in addition to limiting sales of the raw elements.

That insight will be a “sword of Damocles” hanging over all kinds of negotiations for years to come, one of the people said. And not just with the US.

Tuesday’s detente in London doesn’t resolve all the trade measures the US has placed on China, some dating back to the Biden administration. It mostly rolls tensions back to where they were earlier this year, before the surge in tariffs and the responding tit-for-tat moves between the two countries took effect. But it comes after Trump and his aides insisted for months that China couldn’t withstand Washington’s onslaught.

“The ball is in China’s court: China needs to make a deal with us, we don’t have to make a deal with them,” White House press secretary Karoline Leavitt told reporters in April. [I openly mocked that conventional wisdom]

It’s MAED!

This is a case of Mutually Assured Economic Destruction. Either side can economically destroy the other but also itself.

However, one side has elections to worry about while the other doesn’t.

Irony of the Year

China has a rare earth monopoly that’s causing some seemingly strange discussions.

For example, on June 4, I discussed the Irony of the Year: Automakers Consider Moving Some Parts Production to China

Four major automakers are racing to find workarounds to China’s stranglehold on rare-earth magnets, which they fear could force them to shut down some car production within weeks.

Several traditional and electric-vehicle makers—and their suppliers—are considering shifting some auto-parts manufacturing to China to avoid looming factory shutdowns, people familiar with the situation said.

Trade Wars are Good and Easy to Win

March 2, 2018: Trump Tweets “Trade Wars are Good and Easy to Win”

Seven years later ….

June 4, 2025 Trump: I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!

What a hoot.

No one wins trade wars. For now, we are walking back from the brink, but Trump has a lot more backing down to do on tariff percentages and/or export controls.

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