This Is Why The US – China Trade War Truce Has Suddenly Started To Fray At The Seams

From the 02nd of April, when President Trump first announced reciprocal tariffs for almost all trade partners of the US, until the 12th of May, when the US and China formally agreed to a temporary trade war truce, the markets remained perched on a precarious precipice, buffeted by vociferous warnings of a recession and the ensuing volatility. In the intervening days, the US - China trade war largely receded from the market's legendary myopic view, until recently that is.

For the benefit of those who might not be aware, the US and China reached a broad-based understanding during their meeting in Geneva on the 10th and 11th of May, whereby both sides agreed to reduce their import tariffs on each other's goods by 115 percent for 90 days. Subsequently, China slashed its tariffs on US imports from 125 percent to 10 percent, while the US reduced its own levies on Chinese imports from 145 percent to 30 percent. De minimus imports from China (worth under $800) remained subject to a 54 percent levy in the US.

This brings us to the crux of the matter. The US - China détente, however, appears to be falling apart over the past few days. First, the US restricted American companies that provide chip design software from selling their services to Chinese entities. Then, as per an X post by Secretary of State Marco Rubio, the US will soon begin revoking visas of Chinese students, especially those with ties to the CCP. Next, the Commerce Department suspended certain export licenses that allowed US companies to supply engine parts and related technology to China's state-owned aircraft manufacturer, COMAC. Finally, the US is also now considering blacklisting the subsidiaries of Chinese companies that are already on the so-called Entities List.

Meanwhile, in a hard-hitting Truth Social post, President Trump issued a scathing rebuke of China's policies, going so far as to declare that the Asian giant had "totally violated its agreement" with the US.

So, why is the US suddenly going after China via multiple vectors? Well, according to the Wall Street Journal, China's intransigence on rare earth metals is the casus belli here.

Apparently, the US had demanded during the Geneva meetings with the Chinese delegation that the Asian giant promptly resume its rare earth exports to the US. Beijing, however, has continued to employ delaying tactics in approving export licenses for US-based companies.

The situation is apparently so dire that some auto plants in the US might soon be forced to reduce or entirely halt their output.

As we covered in a previous post, rare earth metals are used in an entire gamut of industries, including in the production of magnets for electric motors. In contrast to the commonly held view, the US can't just start refining its own copious rare earth resources at the flip of a switch, for such a feat requires an intricate interplay of massive funding, energy, infrastructure, and vertically integrated supply chain partners. While the US can certainly establish its own rare earth domain, it would likely require the better part of a decade.

About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.

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