Rare Earths for Tariffs

According to Reuters, on October 26, 2025, the United States and China reached a "very important framework agreement" in Kuala Lumpur, Malaysia, aimed at easing bilateral trade frictions. The agreement will avoid the US imposing 100% tariffs on Chinese goods and postpone China's controls on rare earth exports.

China has ample confidence in fully adjusting its rare earth exports. As the "industrial MSG" strategic resource, rare earths are not ordinary soil or commodities but the key cornerstone supporting global military defense, new energy, electronic products, aerospace, medical, and other high-tech industry chains. China is both a major global rare earth reserve holder and producer, possessing mature purification and processing technologies, advanced production equipment, and a complete talent cultivation system. According to the US Geological Survey, as of the end of 2024, global rare earth reserves were approximately 90 million tons, with China's reserves at 44 million tons, accounting for 48.89% of the total. In 2024, global rare earth production was approximately 390,000 tons, with China's output at 270,000 tons, accounting for 69.23% of the total.

To further strengthen rare earth export controls, on October 9, 2025, the Ministry of Commerce issued decisions to implement export controls on certain rare earth items abroad and on rare earth-related technologies. Concurrently, the Ministry of Commerce and the General Administration of Customs issued announcements implementing export controls on certain rare earth equipment and raw materials, as well as certain medium and heavy rare earth items.

US Treasury Secretary Scott Bessent stated on NBC's "Meet the Press" that he expects China to implement some form of delay in rare earth export controls. If China truly postpones rare earth export controls, it would be good news for component manufacturers and downstream producers reliant on rare earth components. The rare earth items subject to China's export restrictions include holmium, erbium, and europium-related items. Holmium has high magnetism and is used to manufacture high-strength magnetic field equipment, such as magnets for nuclear magnetic resonance instruments and lasers, widely applied in medical surgery and material cutting. Erbium is used in erbium-doped fiber amplifiers for optical fiber communications, lasers, and glass coloring. Europium is a key component in red phosphors for fluorescent lamps, LEDs, and plasma displays, and is also used in nuclear reactor control rods and anti-counterfeiting markers.

Bessent also noted that the framework will pave the way for upcoming US-China talks in South Korea, with the agenda expected to include balancing US-China trade relations, China's purchases of US soybeans and other agricultural products, and the US fentanyl crisis.

According to the Ministry of Commerce website, from October 25 to 26, 2025, China and the US held economic and trade consultations in Kuala Lumpur, Malaysia. Guided by the important consensus from recent phone calls between the leaders of the two countries, the two sides conducted frank, in-depth, and constructive exchanges on important economic and trade issues of common concern, including US Section 301 measures on Chinese maritime logistics and shipbuilding, extension of the tariff suspension period, fentanyl tariffs and law enforcement cooperation, agricultural trade, and export controls, reaching basic consensus on arrangements to address each other's concerns.

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