Explainer | US-China trade agreement: what did both sides commit to do?
News Summary
The White House recently released a fact sheet detailing the "historic" trade agreement reached last week between US President Donald Trump and Chinese President Xi Jinping. Previously, China's commerce ministry had issued a brief statement on the agreement but without specific details. According to the White House fact sheet, China committed to issuing general licenses for exports of rare earths, gallium, germanium, antimony, and graphite for the benefit of US end users and their global suppliers, effectively removing controls China imposed in April 2025 and October 2022. Additionally, China will suspend its recently announced expansion of rare earth export controls for one year. Regarding agricultural products, China agreed to purchase at least 12 million tonnes of US soybeans during the last two months of 2025 and a minimum of 25 million tonnes annually for the next three years.
Background
The United States and China play critical roles in global trade, yet their trade relationship has long been marked by tensions and friction. Since early 2025, trade disputes between the two nations had intensified, particularly in strategic minerals and agricultural products. China's imposition of export controls on rare earths and related critical minerals in April 2025 and October 2022 had raised concerns in the US and among its allies. Against the backdrop of President Trump's re-election, this "historic" agreement is seen as an attempt by both countries to de-escalate these tensions and seek a more stable trade relationship. Previously, the US had been pressing China to open its markets and increase purchases of American agricultural products, while China expressed dissatisfaction with US technology restrictions and tariffs.
In-Depth AI Insights
What are the long-term implications of this agreement for critical mineral supply chains? - While China has committed to issuing general export licenses and suspending the expansion of rare earth export controls, this may be more of a tactical gesture than a fundamental policy shift. China's dominant position in global rare earth and critical mineral supply chains remains solid, and short-term relaxation might aim to de-escalate trade conflicts with the Trump administration, gaining strategic maneuverability in other areas. Investors should examine the progress of the US and its allies in building their own supply chains to assess the true impact and sustainability of this "opening." - In the long run, China may still leverage its position in critical minerals to gain advantages in future geopolitical negotiations. Therefore, global high-tech and defense industries reliant on Chinese critical minerals continue to face potential supply risks, prompting relevant companies to pursue diversified sourcing and localized production solutions. What is the underlying logic behind China's significant purchases of US soybeans? - China's commitment to purchase at least 25 million tonnes of US soybeans annually for the next three years is not merely a gesture towards trade balance; it likely reflects China's practical needs in ensuring food security and stabilizing domestic inflation. Under the Trump administration, agricultural purchases are often a key component of trade agreements, serving as a means to support US agricultural states. - Such a large-scale purchase commitment could significantly impact global soybean prices and trade flows, benefiting the US agricultural sector but potentially squeezing market share from other soybean exporting nations like Brazil and Argentina. Investors should monitor global agricultural commodity price fluctuations and related futures markets. How durable is this "historic" agreement under the Trump administration? - Despite being labeled "historic," the durability of this agreement is uncertain given the Trump administration's "America First" and protectionist stance. The Trump administration's trade policy is known for its unpredictability and flexibility, and the implementation and future trajectory of the agreement could be influenced by geopolitical events, domestic political pressures, or changes in economic data. - Investors should view this agreement as a temporary de-escalation rather than a definitive resolution. The US may continue to exert pressure during the agreement's implementation, seeking further concessions, especially on deeper structural issues such as technology transfer, intellectual property, and market access. Therefore, affected businesses should be prepared for potential policy reversals and a resurgence of trade friction.