Breaking Down the Historic Trade Agreement Between Washington and Beijing

In a significant development for global trade, the United States and China have agreed on a preliminary trade “framework” that could prevent escalating tariffs and ease tensions over critical rare earth minerals. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng reached this tentative agreement during talks on the sidelines of the ASEAN Summit in Kuala Lumpur, setting the stage for a crucial meeting between President Donald Trump and Chinese President Xi Jinping scheduled for Thursday in South Korea. The framework addresses key issues including China’s export controls on rare earth minerals, US tariff threats, and broader trade imbalances between the world’s two largest economies.

As global markets watched nervously, this breakthrough offers a glimmer of hope that the escalating trade war might be de-escalating. But what exactly does a “framework” mean in diplomatic terms, and why are rare earth minerals at the center of this high-stakes negotiation?

Understanding What “Framework” Really Means in Trade Negotiations

In diplomatic and trade negotiations, a “framework” represents the skeleton of an agreement—the basic structure and principles that guide more detailed negotiations to come. Think of it as the architectural blueprint before the house is built. According to Reuters, Bessent described the outcome as “a very substantial framework” that addresses immediate concerns while leaving room for leaders to finalize specifics.

A framework agreement typically includes:

• Core principles both parties agree to uphold
• Broad commitments without exhaustive details
• Timeline for implementing specific measures
• Areas requiring further negotiation
• Mechanisms for resolving disputes

Unlike a final trade deal, a framework doesn’t bind countries to specific actions with legal force. Instead, it signals political will and creates momentum toward a comprehensive agreement. “I think we have a very successful framework for the leaders to discuss on Thursday,” Bessent told reporters, as reported by CNBC.

Chinese negotiator Li Chenggang characterized the discussions as reaching a “preliminary consensus,” emphasizing that both sides must now seek domestic approval—a cautious stance that reflects the tentative nature of framework agreements.

The Rare Earth Crisis That Brought Both Nations to the Table

At the heart of this trade framework lies a critical vulnerability in the global supply chain: rare earth minerals. These 17 elements with tongue-twisting names like neodymium, praseodymium, and dysprosium are anything but rare in geological terms. However, China controls an astounding 90% of the world’s processing capacity, giving Beijing enormous leverage in trade negotiations.

Why Rare Earths Matter

These minerals are essential for manufacturing:

• Electric vehicle motors and batteries
• Smartphone components and semiconductors
• Wind turbine generators
• Fighter jet systems (an F-35 requires over 400kg of rare earths)
• Medical imaging equipment
• Renewable energy technology

When China imposed export controls on seven rare earth elements in April 2025, the impact rippled through global industries. Fortune reported that Ford shut down production of the Ford Explorer at its Chicago plant for a week in May due to rare earth shortages. European auto suppliers experienced similar disruptions, with several plants forced to pause production lines.

“China has pointed a bazooka at the supply chains and the industrial base of the entire free world,” Bessent stated bluntly, according to the BBC.

The Escalation That Led to This Framework

The path to this framework agreement has been rocky. After initial talks in Geneva in May led to a temporary tariff truce, tensions flared again when China announced sweeping new export licensing requirements for rare earths in October. The restrictions required foreign companies to obtain Chinese government approval to export products containing even trace amounts of rare earths and to declare their intended use.

Trump responded with characteristic force, threatening to impose an additional 100% tariff on Chinese goods starting November 1. The administration also threatened export controls on “any and all critical software,” according to CNBC.

The economic toll on both nations had become impossible to ignore. The US economy contracted at a 0.5% annual pace from January through March 2025, partly because imports surged as companies rushed to buy foreign goods before tariffs took effect. Meanwhile, China’s factory profits sank more than 9% in May compared to the previous year.

Key Components of the Trade Framework

Based on statements from US officials, the framework agreement includes several crucial elements:

1. Tariff Relief

The agreement eliminates the threat of Trump’s planned 100% tariffs on Chinese imports set for November 1. The current tariff structure—which includes a 10% base “reciprocal” tariff, an additional 20% tariff related to fentanyl trafficking, and a 25% tariff incorporating existing duties—would remain at 55% on Chinese goods, with China applying a 10% tariff on US imports.

2. Rare Earth Export Delays

Bessent indicated that China would postpone implementation of its rare earth minerals and magnets licensing regime by one year while the policy undergoes reconsideration. “I think we have averted that, so the tariffs will be averted,” Bessent told NBC News. However, he stopped short of saying China would completely abandon the restrictions.

3. Agricultural Trade Revival

The framework anticipates that China will resume substantial purchases of US soybeans after buying none in September while favoring supplies from Brazil and Argentina. Bessent told ABC’s “This Week” that US soybean farmers “will feel very good about what’s going on both for this season and the coming seasons for several years.”

4. Other Issues on the Table

According to US officials, the discussions also covered:

• Transfer of TikTok to US ownership control
• Cooperation on addressing the US fentanyl crisis
• US port entrance fees
• Visa policies for Chinese students studying in America

What the Framework Doesn’t Solve

Despite the optimistic tone from US officials, significant challenges remain. The framework is not a comprehensive trade deal, and several critical issues need resolution:

Supply Chain Vulnerability: Even with a one-year delay, China retains its processing dominance. As India Today reports, China produces nearly 70% of the world’s mined rare earths and processes almost 90%, including materials imported from other countries.

Enforcement Mechanisms: The framework lacks specific enforcement provisions. Previous agreements between the US and China have foundered on implementation issues, with each side accusing the other of failing to honor commitments.

Domestic Approval: Chinese officials emphasized that the framework requires domestic approval processes. Beijing’s more cautious public statements suggest internal discussions may be contentious.

Market Skepticism: The stock market response revealed investor doubts about the framework’s effectiveness. According to CNBC, US-listed rare earth mining stocks fell sharply on Monday. Critical Metals dropped more than 17%, USA Rare Earth declined 12%, and MP Materials was down 7.3%—suggesting investors believe China’s one-year delay may undermine American efforts to build alternative supply chains.

The High-Stakes Trump-Xi Summit

All eyes now turn to Thursday’s meeting between Trump and Xi at the APEC Summit in Gyeongju, South Korea. While the White House has confirmed the meeting, China has yet to do so publicly—a telling sign of Beijing’s cautious approach.

Trump expressed optimism, telling reporters aboard Air Force One, “I think we’re going to have a deal with China. I have a lot of respect for President Xi.” He even hinted at future meetings with Xi in China and the United States, possibly at Mar-a-Lago.

Beyond trade, the summit agenda includes several sensitive topics:

• Taiwan’s status (China views the democratically governed island as its own territory)
• The detention of Hong Kong media tycoon Jimmy Lai
• China’s potential role in influencing Russia regarding Ukraine
• Broader geopolitical competition in the Indo-Pacific

Expert Analysis: Can This Framework Hold?

Trade experts offer mixed assessments of the framework’s durability. Naoise McDonagh, an international business lecturer at Australia’s Edith Cowan University, told the BBC that China’s rare earth controls “shock the system” by targeting vulnerabilities in American supply chains. “The timing has really upset the kind of timeline for negotiations that the Americans wanted,” he noted.

Wolfe Research analyst Tobin Marcus wrote in an October 26 note to clients: “Details are still limited, and nothing will be finalized until the Trump-Xi meeting. But a renewed truce now seems near-certain, with China likely fully delaying their rare earth export controls for a year—better than the alternative of an agreement to grant licenses.”

However, Sophia Kalantzakos, a professor at New York University, emphasized that rare earths give China enormous strategic leverage despite their tiny economic footprint. While rare earth exports represent less than 0.1% of China’s $18.7 trillion annual GDP, their “strategic value is huge,” she said, as they provide Beijing with significant bargaining power.

The Long-Term Challenge: Building Alternative Supply Chains

The framework agreement may provide breathing room, but it doesn’t address the fundamental problem: China’s dominance in rare earth processing. According to research from the Center for Strategic and International Studies, the only long-term solution is building alternative supply chains that reduce dependence on China.

US Domestic Efforts

The United States has launched several initiatives:

• Defense Production Act Invocation: Executive Order 14241 directs federal agencies to streamline permitting and accelerate mineral project development on public lands
• DOD Investments: Since 2020, the Department of Defense has invested over $439 million to strengthen domestic supply chains
• MP Materials Development: The company received $35 million in 2022 for a heavy rare earth processing facility, aiming to create the first fully integrated mine-to-magnet operation at Mountain Pass, California

However, even once operational, MP Materials is projected to produce only 1,000 tons of neodymium-iron-boron magnets annually by the end of 2025—less than 1% of the 138,000 tons China produced in 2018.

International Partnerships

Australia has emerged as a key alternative supplier. The country is the world’s fourth-largest rare earth producer and is expanding processing capabilities through projects like:

• Iluka Resources’ Eneabba Rare Earths Refinery (supported by a $1.25 billion government loan)
• Arafura Rare Earths’ Nolans Project (secured $840 million in federal funding)

Trump’s recent state visit to Saudi Arabia resulted in a memorandum of cooperation on critical minerals, including a partnership between MP Materials and Saudi Arabia’s Ma’aden to advance a mine-to-magnet supply chain.

Yet as Marina Zhang, a critical minerals researcher at the University of Technology Sydney, points out: “Even if the US and all its allies make processing rare earths a national project, I would say that it will take at least five years to catch up with China.”

What This Means for Businesses and Consumers

The framework agreement has immediate and long-term implications for various stakeholders:

For Automakers: The one-year delay on export controls provides temporary relief, but companies should continue diversifying supply chains and stockpiling critical components. European and Japanese automakers have already reported supply disruptions affecting production.

For Technology Companies: Smartphone and semiconductor manufacturers face ongoing uncertainty. While the framework may stabilize supplies in the short term, companies should invest in alternative sources and explore material substitution strategies.

For Consumers: The agreement may prevent price spikes on electronic goods, electric vehicles, and renewable energy products that would have resulted from severe supply disruptions. However, long-term supply chain restructuring could lead to gradual price increases.

For Investors: The sharp decline in rare earth mining stocks suggests markets view the framework skeptically. Investors should watch for implementation details and track progress on alternative supply chain development.

The Road Ahead: Cautious Optimism with Significant Risks

The US-China trade framework represents a pragmatic step back from the brink of an escalating trade war that threatened to disrupt global supply chains and damage both economies. By postponing China’s rare earth export controls and avoiding new US tariff threats, both nations have created space for more substantive negotiations.

However, calling this a “breakthrough” would be premature. Framework agreements have a mixed track record in US-China relations, with previous truces collapsing over implementation disputes and renewed tensions. The fact that Beijing has not confirmed the Trump-Xi meeting, and Chinese officials used more cautious language than their American counterparts, suggests significant hurdles remain.

The rare earth crisis has exposed a fundamental imbalance in the global economy: China’s near-monopoly on processing critical minerals gives it extraordinary leverage that will persist until alternative supply chains mature. That process will take years and require sustained investment and international cooperation.

As Bessent noted, “I believe China is open to discussion and I am optimistic this can be de-escalated.” But optimism must be tempered with realism about the deep structural issues underlying US-China trade tensions.

Take Action: What You Can Do

Understanding these trade dynamics is crucial for making informed decisions:

1. Business Leaders: Conduct supply chain audits to identify rare earth dependencies and develop contingency plans. Consider diversifying suppliers and building strategic reserves of critical components.

2. Investors: Research companies developing alternative rare earth sources and processing capabilities. Monitor geopolitical developments that could impact supply chains.

3. Policy Advocates: Contact elected representatives to support funding for domestic critical mineral development and partnerships with allied nations.

4. Consumers: Stay informed about how trade policies affect product availability and prices. Consider the supply chain resilience of major purchases like electric vehicles.

The framework agreement may be just the beginning of a long process toward trade stability between the world’s two largest economies. Whether this tentative understanding evolves into lasting cooperation or proves to be another temporary pause in an ongoing trade war will depend on the political will, economic necessity, and strategic calculations of both Washington and Beijing in the months ahead.