US-China Trade Truce Stabilizes on Agriculture, Rare Earths

United States Trade Representative Jamieson Greer signaled a stabilization in US-China Trade: Ag Deal Progress Tempered by Tariff Questions">US-China trade relations, Bloomberg reported on May 15, 2026. Speaking from a summit in Beijing, Greer noted progress in key areas, including Chinese purchases of US agricultural goods and the supply of rare earth materials. Despite this cautious optimism, existing tariffs affecting over $300 billion in goods and persistent supply chain vulnerabilities remain significant challenges for both economies.

What Progress Was Made on Agriculture and Rare Earths?

Progress in agricultural trade is a cornerstone of the current trade truce. Greer indicated that China is making good-faith efforts to meet purchase commitments for US soybeans, corn, and pork. These purchases are politically and economically significant, providing relief to the American farm belt, a key constituency. The renewed flow of agricultural goods helps restore some of the trade volume lost during the height of the trade war, which saw agricultural exports to China fall by over 50% in some quarters.

On the supply side, assurances regarding rare earth elements are critical for US high-tech and defense industries. China currently controls over 70% of the global mining and processing of these 17 essential metals. Greer’s comments suggest that Beijing has provided some level of assurance that it will not weaponize its dominance over these supplies, a long-standing concern for Washington. This stability is crucial for manufacturing everything from electric vehicles to advanced missile systems.

How Do Existing Tariffs Impact Trade Volumes?

Despite the positive tone, a vast network of tariffs remains in place, acting as a significant brake on bilateral trade. The US maintains Section 301 tariffs on approximately $370 billion of Chinese imports, with average rates hovering around 19%. These levies increase costs for American consumers and businesses that rely on Chinese-made components and finished products. The tariffs were initially imposed to combat intellectual property theft and forced technology transfers.

China’s retaliatory tariffs cover over $110 billion in US goods, targeting key American exports. While the current truce prevents further escalation, the existing tariff structure continues to distort trade flows and complicate business planning. Companies have absorbed some costs, but many have been passed on to consumers, contributing to inflationary pressures. A comprehensive rollback of these tariffs is not currently on the table, indicating that this economic friction will persist for the foreseeable future.

Are Supply Chains Truly Decoupling from China?

The conversation around supply chains has shifted from full decoupling to strategic "de-risking." Greer’s remarks align with this trend, acknowledging that a complete separation is impractical for most industries. Instead, US policy encourages diversification, pushing companies to establish alternative production hubs in countries like Vietnam, Mexico, and India. This strategy, known as "China plus one," aims to reduce over-reliance on a single country for critical goods.

However, this process is slow and expensive. For many complex products, like consumer electronics, China’s manufacturing ecosystem offers scale and efficiency that is unmatched. Apple, for example, has expanded production in India but still relies on its Chinese facilities for the majority of iPhone assembly. The current trade stability may slow the pace of this diversification, as companies weigh the high cost of moving against the reduced immediate risk of new tariffs.

What Are the Remaining Risks to the Trade Truce?

The primary risk to the truce is the fragile geopolitical landscape. Tensions beyond trade, particularly concerning technology competition and national security, could easily spill over and unravel the progress made. The US continues to tighten export controls on advanced semiconductors and related equipment, a move Beijing views as a direct attempt to stifle its technological advancement. Any escalation in this domain could provoke retaliation in the trade sphere.

Another limitation is domestic political pressure in both nations. In the US, a tough stance on China often has bipartisan support, and any perceived concessions could be politically costly. Similarly, Beijing must project strength on the global stage for its domestic audience. This dynamic creates a narrow path for negotiators, where substantive compromises are difficult to achieve. The current stability is therefore best viewed as a temporary de-escalation rather than a permanent resolution.

Q: What are rare earth materials and why are they important?

A: Rare earth elements are a group of 17 metals essential for modern technology. They are used in magnets for electric vehicle motors and wind turbines, in batteries for smartphones and laptops, and in critical defense applications like precision-guided munitions and stealth technology. China's dominance in their mining and processing—controlling over 70% of the global supply—gives it significant strategic use.

Q: Does this truce affect technology sector restrictions?

A: No, the current trade truce appears focused on legacy issues like agricultural purchases and tariffs on goods. It does not address the separate and escalating US restrictions on technology exports to China. The US Commerce Department continues to enforce strict controls on the sale of advanced semiconductors and chip-making equipment, viewing it as a matter of national security distinct from general trade.

Bottom Line

The US-China trade truce is holding, but it rests on a fragile foundation of unresolved tariff and geopolitical issues.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.