The fragile truce between Washington and Beijing over rare earth supplies is showing clear limits. While a deal struck by U.S. President Donald Trump and Chinese President Xi Jinping in October was meant to ease restrictions and stabilize trade, U.S. buyers say access to the most critical inputs remains constrained. The result is a growing gap between headline diplomacy and on-the-ground reality—one that continues to shape industrial strategy, national security planning, and investor expectations across the supply chain.

Market participants across the rare earth ecosystem say China has increased exports of finished products, particularly permanent magnets, but continues to restrict shipments of raw materials such as dysprosium and other key elements. These inputs are essential for the United States to build its own magnet-making capacity, a strategic priority for the administration. Without them, U.S. manufacturers remain dependent on Chinese processing, undermining the goal of supply-chain independence.

Finished Goods Flow, Raw Materials Do Not

Since the October agreement, China has partially restored exports of permanent magnets to the U.S., easing immediate shortages for manufacturers of consumer electronics, electric vehicles, and industrial equipment. However, buyers report that access to upstream materials—metals and oxides required to produce those magnets domestically—remains effectively blocked.

This distinction matters. Finished magnets help keep factories running in the short term, but they do little to support long-term industrial resilience. By limiting raw materials while allowing exports of higher-value products, China preserves its dominant position in rare earth processing, where it has spent decades building scale, expertise, and pricing power.

Official data underscores the mixed picture. Chinese customs figures show magnet exports to the U.S. fell 11% in November from October, even as overall exports of rare earth products rose 13% month-on-month. Beijing argues such fluctuations are normal and insists it remains committed to stable global supply chains, while reserving the right to restrict exports tied to military applications.

Strategic Friction Beneath the Truce

For U.S. policymakers, rare earths sit at the intersection of trade, technology, and defense. Permanent magnets are used not only in consumer products but also in missile guidance systems and advanced military hardware. That dual-use nature has made them a focal point of industrial policy.

The Trump administration has emphasized the need to develop domestic processing capacity after years of Chinese dominance. Yet industry executives say progress is being hampered by continued restrictions. U.S. magnet producers report they cannot source critical materials from China, even indirectly, leaving domestic projects exposed to delays and higher costs.

This reality highlights a deeper issue: trade agreements can ease surface-level tensions without resolving structural dependencies. China’s ability to selectively control inputs gives it leverage that extends beyond tariffs or headline commitments, reinforcing its role as a gatekeeper in strategically sensitive industries.

Implications for Markets and Investors

For investors, the situation reinforces the long-term case for supply-chain diversification and strategic materials outside China. Companies involved in alternative rare earth sourcing, recycling, or processing in the U.S., Australia, and allied regions may benefit as governments and manufacturers seek redundancy.

At the same time, the uneven flow of materials introduces volatility. Short-term relief from finished goods imports can mask longer-term constraints, creating false confidence in supply stability. Markets may underestimate the risk until a disruption forces a repricing.

Looking Ahead

The rare earth standoff suggests that even after high-profile deals, U.S.–China economic relations remain transactional and fragile. Unless access to raw materials improves meaningfully, U.S. ambitions to build an independent rare earth supply chain will continue to face structural headwinds. For now, the gap between diplomatic agreements and industrial reality remains wide—and strategically consequential.