Table of Contents
- U.S.-China Trade Truce: What Changed?
- National Security Controls Now on the Table
- How Rare Earths Gave China Leverage
- Business and Tech React
- What’s Next for U.S.-China Relations?
- Sources
U.S.-China Trade Truce: What Changed?
In a dramatic shift during high-stakes talks in South Korea, President Donald Trump and Chinese President Xi Jinping announced a temporary truce aimed at de-escalating months of economic tension. The agreement includes U.S. tariff rollbacks, a pause on new fees targeting Chinese shipping, and China’s promise to resume soybean purchases and curb fentanyl precursor exports.
But buried beneath the headline-grabbing trade terms lies a far more consequential concession: the U.S. agreed to pause a recently enacted national security rule that expanded restrictions on Chinese tech firms’ access to advanced semiconductors and other critical technologies.
National Security Controls Now on the Table
For decades, U.S. administrations—from Bush to Biden—treated export controls as non-negotiable, citing national security. That changed this week.
The Trump administration has agreed to suspend for one year a Commerce Department rule that added majority-owned subsidiaries of blacklisted Chinese companies to the “entity list.” Originally intended to close a loophole allowing sanctioned firms to sidestep restrictions via shell companies, the rule ballooned the list from roughly 1,300 to over 20,000 China-linked entities, according to data platform Wirescreen.
“Export controls have now become a tradable item in the relationship,” said Christopher Padilla, former export control official under George W. Bush. “You’ve discarded decades of precedent.”
Why This Matters
This marks the first time the U.S. has explicitly tied national security export controls to trade negotiations—a major strategic win for Beijing, which has long demanded such linkage.
How Rare Earths Gave China Leverage
China’s dominance in rare earth minerals—essential for everything from electric vehicles to fighter jets—proved decisive. In October 2025, Beijing expanded export curbs on these critical materials in response to U.S. tech restrictions.
Treasury Secretary Scott Bessent called the move “a bazooka at the supply chains and the industrial base of the entire free world.” With production lines stalling globally, the U.S. faced mounting pressure to compromise.
Analysts say China’s strategy was deliberate: mirror U.S. tactics by weaponizing its own economic strengths. “It was just a matter of time,” said Emily Benson of Minerva Technology Futures.
Business and Tech React
While national security hawks expressed alarm, U.S. business groups welcomed the pause. Sean Stein, president of the U.S.-China Business Council, called the reversal of the “50% rule” and China’s rare earth rollback “especially welcome news.”
Many tech firms had complained the rule imposed impossible due diligence burdens. Yet critics warn the concession sets a dangerous precedent—opening the door for future trade-offs on security.
What’s Next for U.S.-China Relations?
The one-year pause creates a fragile window. Both sides have accused each other of bad faith in past truces. After a May agreement in Geneva, the U.S. immediately tightened AI chip rules, prompting China to retaliate with renewed rare earth controls.
With the National Security Council’s influence waning under Trump and inter-agency coordination appearing fractured, analysts fear inconsistent policymaking could undermine long-term strategy.
Still, the current deal offers breathing room—for now.
