Trump’s Rare Earths Trade Deal: Invest Now or Wait for Xi’s Nod?

The global race for rare earth elements (REEs) is heating up, with nations vying for control over these critical materials that power everything from smartphones to electric vehicles and advanced defense systems. A recent development has put the spotlight back on the complex relationship between the United States and China: a proposed trade deal, spearheaded by former U.S. President Donald Trump, aimed at securing a stable supply of REEs for American industries. But with China holding a dominant position in the rare earths market, the question arises: Should investors jump in now, or wait for the nod from President Xi Jinping?

The Rare Earths Landscape: A Geopolitical Hotspot

Rare earth elements are a group of 17 metallic elements essential for various modern technologies. Despite their name, they are not particularly rare in the Earth’s crust, but economically viable concentrations are less common than other mineral commodities. What makes them strategically important is their use in high-tech applications and the concentration of their production and processing in a single country: China.

China’s dominance in the rare earths market is undeniable. According to the US Geological Survey’s 2024 data, China controls roughly 69% of global rare earth production and nearly 90% of processing capacity. This near-monopoly has raised concerns worldwide, as it gives China significant leverage over global supply chains and the potential to disrupt industries that rely on these materials.

Trump’s Trade Deal: A Promise of Stability?

In June 2025, former U.S. President Donald Trump announced a trade agreement with China, which he claimed would ensure a steady supply of rare earth elements and magnets to the United States. According to Trump, the deal included a commitment from Beijing to resume exports of these critical materials, following months of export restrictions that had disrupted key industries. In return, the U.S. would supposedly allow Chinese students to continue studying at American universities.

However, the details of the agreement remained vague, and some analysts questioned whether it would truly address the underlying issues of supply chain vulnerability and China’s dominance. Concerns were raised about the enforceability of the deal and whether China would fully comply with its commitments.

The Geopolitical Chessboard: Xi’s Nod and Beyond

The proposed trade deal is subject to final approval from both President Trump and President Xi Jinping, adding another layer of uncertainty to the situation. President Xi’s decision will likely be influenced by a complex set of factors, including the overall relationship between the U.S. and China, domestic economic considerations, and strategic goals related to maintaining China’s dominance in the rare earths market.

Even if President Xi approves the deal, there is no guarantee that it will provide long-term stability for the rare earths supply chain. Geopolitical tensions between the U.S. and China remain high, and trade relations could easily be disrupted by future disagreements or policy changes.

Investing in Rare Earths: A Risky Proposition?

Investing in rare earth elements can be attractive due to their growing demand and strategic importance. The global rare earth metals market is projected to grow from USD 3.74 billion in 2024 to USD 8.14 billion by 2032, exhibiting a CAGR of 10.2% during the forecast period. However, it’s crucial to acknowledge the inherent risks.

China’s Market Dominance: China’s control over the rare earths market creates volatility and uncertainty. The country can manipulate prices and restrict supply, impacting companies and investors involved in the industry.
Geopolitical Tensions: The rare earths market is heavily influenced by geopolitical factors. Trade disputes, export restrictions, and political instability can all impact the supply and demand for these materials.
Environmental Concerns: Rare earth mining and processing can have significant environmental impacts, leading to stricter regulations and increased costs for companies operating in the sector.
Technological Advancements: The development of alternative materials and technologies could reduce the demand for rare earth elements in certain applications, impacting the long-term prospects of the industry.

Alternative Strategies and Emerging Opportunities

Given the risks associated with direct investment in rare earth mining and processing, investors may want to consider alternative strategies:

Companies Developing Alternatives: Invest in companies developing alternative materials to replace rare earth elements in various applications. For example, iron nitride and manganese aluminum carbide (MnAlC) are emerging as promising contenders for magnet production.
Recycling Technologies: Support companies focused on developing and implementing rare earth recycling technologies. Recycling can help reduce reliance on primary mining and create a more sustainable supply chain.
Geographically Diversified Producers: Look for rare earth producers operating outside of China, particularly in countries with stable political environments and strong environmental regulations. Canada and Australia are examples of countries with significant rare earth reserves and growing production capacity.
Downstream Applications: Consider investing in companies that use rare earth elements in their products, such as electric vehicle manufacturers or renewable energy companies. These companies may benefit from a more secure and diversified supply chain.

The Verdict: Proceed with Caution

The proposed trade deal between the U.S. and China offers a glimmer of hope for stability in the rare earths market, but it is far from a guaranteed solution. Investors should carefully weigh the risks and uncertainties before making any decisions.

Waiting for President Xi’s nod may seem like a prudent approach, but it could also mean missing out on potential opportunities. A more balanced strategy involves diversifying investments across different segments of the rare earths value chain and exploring alternative materials and technologies.

Ultimately, the decision to invest in rare earths now or wait for further developments depends on your individual risk tolerance and investment goals. However, one thing is clear: the rare earths market is a complex and dynamic landscape that requires careful analysis and a long-term perspective.