China's Rare Earth Controls and the Trump-Xi Deal

China didn't just threaten — it moved.

On October 9, 2025, Beijing's Ministry of Commerce issued Announcement No. 61 of 2025, according to the Center for Strategic and International Studies (CSIS). These are the strictest rare earth and permanent magnet export controls China has ever implemented, introducing a tool that Washington created and never expected to have turned against it.

China Adopts America's Own Strategy

The foreign direct product rule — FDPR — was created by the U.S. in 1959 and has been Washington's go-to tool for strangling China's semiconductor supply chain. Now Beijing has flipped it.

Under Announcement No. 61, any foreign company anywhere in the world must get Chinese government approval to export magnets containing even 0.1 percent heavy rare earth elements of Chinese origin — or produced using Chinese mining, processing, or magnet-making technology. According to CSIS analyst Gracelin Baskaran, that's essentially the entire global supply chain. China controls roughly 70 percent of rare earth mining, 90 percent of separation and processing, and 93 percent of magnet manufacturing worldwide.

This isn't a tariff. It's a chokehold on production lines for F-35s, Virginia-class submarines, Tomahawk missiles, Predator drones, and radar systems.

Starting December 1, 2025, companies with any affiliation to U.S. defense contracts were set to face the harshest licensing scrutiny.

Trump and Xi Reach Agreement

President Trump traveled to South Korea and met Xi Jinping — their first face-to-face since 2019 — and the two reached an agreement that effectively paused the most aggressive enforcement provisions, according to Fortune. The deal buys approximately one year of breathing room.

Trump also signed an $8.5 billion rare earth minerals agreement with Australian Prime Minister Anthony Albanese on October 20, 2025, per Fortune. The deal signals Washington is attempting to build alternative supply chains through allies.

A one-year pause, however, is far from a permanent solution.

One Year Is Not Enough

Georgetown Law scholar Peter Harrell — who advised both the Trump and Biden administrations on supply chain security — told Fortune the deal doesn't address "the rot that put America in this position in the first place."

Bloomberg's reporting frames the recovery timeline at another decade to untangle a $1.2 trillion rare earth dependency. A one-year pause on Chinese enforcement doesn't move that needle significantly.

Analyst Sergey Ivashchenko, writing for RealClearDefense in April 2026, argues China's export controls weren't a panic move or a bluff — they were the opening of a deliberate chain of consequences targeting U.S. defense supply chains, shifting influence in Africa over rare earth deposits, and accelerating the formation of rival technological blocs. The short-term market panic obscured the long-term strategic pivot.

China is scaling its own munitions manufacturing five to six times faster than the United States, according to CSIS. The rare earth controls are designed to compound that gap — not just during this trade dispute, but permanently.

The Structural Problem Beneath the Headlines

Most outlets are framing this as a trade war back-and-forth. Tariffs up, controls announced, deal struck, crisis averted.

The FDPR application is a structural escalation, not a bargaining chip. Once Beijing establishes the legal and regulatory infrastructure to license rare earth exports globally, that infrastructure doesn't disappear when trade tensions ease. It sits there, ready to be activated the next time Washington challenges Beijing over Taiwan, semiconductors, or anything else.

The $8.5 billion Australia deal is real progress — but Australia accounts for a fraction of the processing capacity needed. Mining ore is one thing. Separating, refining, and manufacturing finished magnets is where China's dominance is nearly absolute, and those capabilities take years and billions to replicate, not months.

Coverage from Fortune and CSIS gets the facts right but underplays the FDPR precedent. RealClearDefense is the only outlet treating this as the strategic inflection point it is.

The Clock Is Running

If you drive a car, use a phone, or want the U.S. military to maintain its edge — this affects you directly.

The one-year delay is real. But December 2026 arrives whether Washington is ready or not. If domestic processing capacity, allied supply chains, and strategic reserves aren't meaningfully further along by then, China will squeeze again — from a stronger position, having spent another year building leverage while America debates permitting timelines for domestic mining projects.

The deal Trump cut was necessary. It was also barely enough.