Trade deal or no trade deal, China still holds crucial minerals leverage over U.S.

China still has substantial leverage over the U.S. in its dominance of the rare earth minerals market, despite the two countries agreeing to a framework trade deal days before a meeting between U.S. President Donald Trump and Chinese President Xi Jinping.

The meeting between the leaders, the first of Trump’s second term, is set to happen Thursday on the sidelines of the annual Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, South Korea.

It comes as the world’s two largest economies are embroiled in a trade war that has seen the countries levy tariffs higher than 100 per cent, threatening to rock the global economy — and revealing that China is willing to use its strengths as bargaining chips in the face of increasing economic threats from the White House. 

There was, however, optimism that tariffs would be averted just days before Trump and Xi are slated to meet, after top officials from both countries announced a potential trade agreement following months of talks between officials, including in Geneva in May and Madrid in September.

“The tariffs will be averted,” stated U.S. Treasury Secretary Scott Bessent, who, alongside U.S. trade representative Jamieson Greer and Chinese Vice-Premier He Lifeng at the Association of Southeast Asian Nations summit in Kuala Lumpur announced a “substantial framework” for Xi and Trump’s meeting.

“I think we’re going to have a deal with China,” Trump said later.

However, the truce continues to be tenuous, considering the ebbs and flows of the U.S.-China relationship.

“There is a ceasefire going on. It doesn't mean there's disarmament,” said Mary Lovely, a senior fellow at the Peterson Institute for International Economics in Washington, D.C. 

“These tools will still be available to both sides," she said, referring to tariffs and using various domestic industries as leverage.

Although the details are still murky, Bessent said the agreement included a “final deal” to transfer TikTok’s U.S operations to new ownership or face a ban, something Trump has delayed several times. 

Bessent also said China could resume buying soy beans from U.S. farmers after Chinese orders stopped completely in the trade war. 

He suggested the 100 per cent tariff on Chinese imports Trump threatened would not take effect Nov. 1. 

But perhaps most importantly, the deal would see China delay its export controls on rare earth minerals for a year — a major pain point for Washington.

For some watchers, the agreement signals an important acknowledgement of the consequences of a blowout.