The dealer in rare earths versus the dealmaker
On 30 October 2025, the two most powerful men in the world, Xi Jinping and Donald Trump, met in Busan in South Korea to settle their differences. After weeks of long-distance jousting, they seem to have buried the hatchet, at least for the time being. The two parties have reached an agreement, firstly on the substance of an agreement, with the form to follow in the coming weeks.
The outlines are as follows. Beijing has agreed to suspend restrictions on rare earth exports for a year, undertaken to purchase “immense quantities” of US soybeans and will step up measures to combat production of the chemical precursors of fentanyl – an opioid wreaking havoc among the US population. In return, Washington will reduce trade tariffs on Chinese goods by 10% – to a tariff rate of around 30% on average – and relax some of the restrictions on the export of electronic chips to China. Whilst these concessions draw the outlines of a ceasefire or of a cold war following open hostilities, this episode in the trade war raging since the beginning of April is a good illustration of the changes to the global order.
The two parties are negotiating as equals. By weaponising the trade in rare earths – crucial for the production of arms and electronic vehicles and goods – China has demonstrated that as its major producer and practically its sole refiner, it holds a huge bargaining chip against Washington’s threats. By imposing drastic conditions on the use of rare earths transiting through its country, Beijing has also demonstrated its capacity to exert influence beyond its borders. Just as the White House is able to do thanks to the power of the US dollar, China’s capacity to exercise coercive power beyond its borders is a real and credible threat.
Public enemy number three. By reducing trade tariffs on China, Donald Trump has downgraded Beijing’s status as the number one target. India and Brazil are now the partners hardest hit by US trade tariffs.
Dealmaker or dealbreaker? The way the trade war has unfolded from April to October marks a shift. With the end of US multilateralism and the move towards the new “America First” doctrine, China has become the apostle of free trade and multilateralism, particularly among its regional partners. The withdrawal of the US from numerous supranational institutions opens the way for Beijing to take on this role and to play a greater role in world politics.
For financial markets and global growth, this agreement removes one of the risks that has been fuelling volatility for the last six months. Will this push stock markets to new highs?