Can China’s Rare Earth Leverage Tip the Trade Talks?

Ninety days after the world’s two largest economies paused their trade war, negotiators in Stockholm walked away without a breakthrough. The United States and China agreed to seek an extension to their fragile tariff truce, leaving industries and global markets in limbo.

At the heart of high-stakes talks is China’s control over rare earths, critical raw materials needed for electronics, defense, and clean tech. As the clock ticks down to the August 12 deadline, both sides assess their leverage.

Rare Earths: Quiet Powerhouse in Trade Dynamics

Although they are rarely in the news, rare earth elements power a vast range of modern technologies. China mines and processes the majority of these minerals, which are essential for smartphones, EV batteries, wind turbines, and military hardware.

For the US, which relies heavily on Chinese exports for these materials, the risk is clear. Any hint of restriction or export disruption ripples through supply chains, sending manufacturers scrambling for alternatives.

Did you know?
China supplies over 70% of global rare earths, crucial for electronics, defense, and renewable energy manufacturing worldwide.

Beijing Signals Strength, But Stays Measured

Chinese officials arrived in Stockholm keenly aware of this leverage. Analysts noted that Beijing's grip on global rare earth flows bolstered its negotiating position, despite its avoidance of aggressive rhetoric.

Chief economist Cyrus de la Rubia observed, “China is well aware of its strong negotiating position, as could clearly be seen in the temporary escalation observed in April.” The message: rare earths aren’t just materials; they’re a strategic asset.

No Major Deal As Uncertainty Remains

Despite constructive meetings, US officials said that President Trump alone will determine if the truce will extend. “We’ll report back to him the process we had here...he’ll decide,” US Trade Representative Jamieson Greer said after talks with China’s top negotiator, Li Chenggang.

Concrete outcomes were left out, though delegates spoke of “growing mutual respect” and a clearer understanding of each side’s needs. However, without a consensus, the business community may face the possibility of renewed tariffs that could reach triple-digit figures.

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Global Impact Ready to Unfold

A prolonged standoff would result in not only higher prices but also potential shortages of goods that depend on rare earths. The International Monetary Fund identified this situation as a key risk, even while it raised its global growth forecast for the year.

Unlike Europe, which is under pressure from US security ties, China can afford to allow negotiations to extend for a longer period. Its dominance in rare earth, paired with a robust domestic market, offers a cushion the US must weigh as it calibrates its next move.

All Eyes on Next Steps

Both countries signaled their plans to hold more talks, potentially in 90 days, which would mirror the previous extension. In the meantime, Trump’s decision has global consequences for various industries, financial markets, and consumers who are looking for signs of either disruption or resolution.

As the final deadline looms, the world watches to see if rare earth leverage truly tips the scale or if both superpowers find common ground.