The United States and China have reached a draft trade agreement that seeks to resolve critical tensions over rare earth minerals and student visas, according to US President Donald Trump.
The agreement, though not yet finalised, was announced after two days of negotiations in London.
In a post on his media platform Truth Social, Trump stated, “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.”
The agreement comes at a time of heightened concern among US defence contractors over the vulnerability of their supply chains.
Rare earth metals, including samarium, are essential for the production of advanced military hardware. Lockheed Martin, a major US defence contractor and the country’s largest user of samarium, relies entirely on Chinese supplies of the rare earth metal.
The draft deal is seen as a relief for the US military-industrial base, which feared significant disruptions if Chinese export restrictions were not lifted.
According to Gracelin Baskaran of the Center for Strategic and International Studies (CSIS), rare earths are critical for producing F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, unmanned aerial vehicles, and smart bombs.
During the earlier stages of negotiations, China had imposed export restrictions on seven rare earth elements, specifically targeting the aerospace and defence sectors. Additionally, Beijing restricted 15 US defence-related entities from receiving dual-use goods.
“The United States is already on the back foot when it comes to manufacturing these defence technologies,” Baskaran said in a CSIS interview. She noted that China is expanding its munitions production five to six times faster than the US.
“While China is preparing with a wartime mindset, the United States continues to operate under peacetime conditions.”
The US-China trade war, which began earlier this year, saw both countries impose escalating tariffs that strained global markets.
In May, talks in Geneva produced a temporary truce, lowering US tariffs from a peak of 145% down to 30% and Chinese tariffs to 10%. However, China retained control over export licences for rare earth elements, keeping pressure on US defence and automotive industries.
President Trump confirmed that under the new agreement, US tariffs would stabilise at 55%, a figure that includes earlier tariffs from his first term. In return, China would guarantee supplies of rare earths and magnets vital for US military production.
Apex Magnets, a supplier of specialised magnets, emphasised that these components are critical for guided missiles, satellite-guided smart bombs, and various military aircraft.
The Pentagon has been concerned that weapon stockpiles have been depleted due to deliveries to Ukraine and Israel, raising vulnerabilities should the US face a large-scale conflict with another major power.
The Pentagon’s concerns date back several years. In 2019, Trump directed the Department of Defense to seek alternative sources for rare earth elements, especially samarium, citing national defence priorities. However, domestic production capacity remains limited.
To break the deadlock during recent negotiations, US Secretary of State Marco Rubio reportedly threatened to revoke hundreds of thousands of visas for Chinese students.
Publicly framed as a national security measure to counter alleged espionage, the visa threat was also seen as a bargaining tactic tied to rare earth negotiations, according to Axios.
The visa issue had become another flashpoint between the two countries.
Beijing has repeatedly objected to US restrictions on Chinese students, particularly those studying science and technology fields. Under the new agreement, the US will pull back on these visa restrictions.
White House press secretary Karoline Leavitt stated that President Trump was reviewing the deal but expressed confidence in the progress made. “What the president heard, he liked,” she said.
Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick both emphasised that while this framework marks significant progress, further negotiations will be necessary to resolve other complex trade issues.
Lutnick, speaking to CNBC, said the deal “cleaned up” the Geneva framework and reassured markets that both sides are “totally on the right track.”
While the announcement provided some relief, many analysts view the agreement as limited in scope.
The timing of the agreement is also politically significant. Trump is scheduled to oversee a military parade in Washington DC this weekend, widely seen as a demonstration of US military strength and a message to both domestic and international audiences.
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