Japan / USA - Trump on Expanding East Asian Rare Earth Deals

Key Takeaways 

●       Trump and Takaichi’s meeting on 28 October enabled significant trade deals on rare earth extraction and processing, as well as nuclear energy development projects.

●       Trump’s APEC meeting with Xi on 30 October marked a temporary stop to the Chinese rare earth curbs.

●       As rare earths are increasingly sought and needed in manufacturing modern technologies, a wider variety of industries are affected by movement and disruptions in the rare earth supply chain.

Following China’s tightening of rare earth export controls in early October, US President Trump has aimed to secure regional agreements to protect the rare earth supply chain. Such steps have been made during the 28 October meeting between President Trump and Japanese PM Takaichi, securing deals on critical minerals, specifically rare earths, and nuclear power. An additional, partial détente in trade tariffs was also attained during the 30 October APEC meeting between Trump and his Chinese counterpart, temporarily suspending rare earth curbs. Rare earth critical minerals impact the global economy, with the supply chain affecting almost every industry, from television screen manufacturing to fighter jets.

Trump and Takaichi’s First Meeting

On 28 October, US President Trump and Japanese PM Takaichi met in Tokyo to agree on a nuclear power reactor and a rare earths framework. The deal aims to diversify supply chains, support joint projects, stockpile arrangements, and encourage cooperation between international partners. The projects both governments set are linked to AI, critical minerals, and energy. Japan has equally pledged to invest up to $400 billion USD in the US. Both leaders were elated at the success of the meeting, declaring the deal as the “new golden age” of the US-Japan relationship.

The framework is meant to secure rare earth supplies; however, it did not take into account China’s greater part in the mineral supply chain. Using economic policy and coordinated investments, both states hope to boost non-China fair markets of critical minerals and rare earths, including financial support for select projects, and complementary stockpiling arrangements and international partner collaboration to secure the rare earth supply chain. Trump hopes for Japan’s markets to open up, not only in terms of rice but also soybeans and greater access to American vehicles. Takaichi is more reserved on this front and prioritises the protection of domestic industries and the demands of domestic interest groups, including the influential farming lobby.

Additionally, the deal includes a section on coordinated investments and a Rapid Response Group to manage supply stocks. Takaichi favours nuclear power and locates it at the centre of Japanese energy security. The Japanese firms Mitsubishi Heavy Industries and Toshiba could contribute in the future to new-generation nuclear projects and have been included in trade discussions. On the US side, Japan has pledged additional US liquefied natural gas purchases, offering an alternative to Russian energy sanctions. Japanese companies such as JERA and Tokyo Gas have also been cited to increase their commitments to liquefied natural gas from Alaska.

JERA additionally pledged $1.5 billion in stakes in gas projects in Louisiana, a production zone that is already used by Tokyo Gas and Mitsui. Japan has further promised investments to the US through Toyota’s $10 billion plan for new plants. Tariffs on Japanese automobiles were subsequently lowered to 15%, matching the line with South Korea. Trump additionally pressed Takaichi for supplementary agricultural and vehicle market access, while Japan still needs to balance out its trade agreements with China.

Additional progress has been made on identifying mutual interests in building and developing AP1000 nuclear reactors and small modular reactors. This talking point is essential to Takaichi’s policy goals for Japan and could help in energy security and power supply demands. Around 20 companies have already demonstrated interest in taking part in the $550 billion joint investment projects..

Before he arrived in Japan, President Trump had secured deals with Japan, Malaysia, Thailand, Vietnam, and Cambodia.

The deals are an effort to diversify access to regional minerals, minerals essential for the manufacturing of electric vehicles and smartphones. The agreements are non-binding MOUs and reflect an attempt to reduce dependence on China as well as an initial effort to weaken Beijing’s stronghold on rare earths. For Japan, these discussions are also part of a broader push to halt Russian energy imports, despite their lower prices, and to prioritise American liquid natural gas imports.

Trump-Xi Cooperation on Trade

American and Chinese negotiators met at the APEC summit on 30 October to establish a framework for a deal on American tariffs and Chinese rare earth export controls. Prior to the meeting, China had restricted agricultural imports and American exports to pressure Washington. As China produces 70% of the world’s rare earths, as well as processing 90%, the meeting aimed to stabilise relations between the two countries for the rest of Trump’s presidential term.

The meeting between Trump and Xi last Thursday led to an agreement, where China would buy 12 million metric tons of American soybeans until January and 25 million in the next three years. Equally significant, China approved greater US control on TikTok and agreed to purchase additional US gas and oil. In exchange, the US planned to suspend some Entity List restrictions as well as loosen certain maritime measures. The US also agreed to halve the 20% tariff on Chinese goods for fentanyl opioid precursor chemicals, reducing it to 10% on duties.

The Thursday agreement to resolve rare-earth issues is set up to be “a worldwide situation”. This one-year agreement effectively offers a short-term reprieve for soybean purchasers and carmakers alike. It also expands to include foreign producers using Chinese technology and materials, like semiconductors, aircraft engines, and military radars.

Ahead of Trump and Xi’s meeting on Thursday, Beijing announced new compliance rules for foreign rare earth producers and restricted dozens of new refining technologies through its control list starting 1 December 2025. Foreign producers of rare earth magnets are also affected, now needing a Chinese export licence if the final product uses Chinese equipment. These regulations reflect Trump’s own restrictions on semiconductor exports containing Chinese materials.

Rare Earths Supply Chain and Market Considerations

Such trade discussions are vital to the well-being of affected industries. Rare earths and other discussed critical minerals are essential to the defence, automobile, and electronics sectors. As a result, these critical minerals are central to the wider global economy, the most popular being nickel, manganese, and cobalt. Renewable energies are also affected, specifically by the use of rare earths in magnets. The wider private sector is also affected by the discussions, as rare earths can be found in everyday items like lightbulbs or high-tech products like guided missiles. Most importantly, these minerals cannot be substituted, highlighting the relevance of China’s quasi-monopoly of rare earth production patents and refining.

The exact effects and implications of such agreements between Japan, China, and the US remain unclear. Especially considering the European Union and the US aim to develop and build their own alternatives to the Chinese rare earth market, as China aims to localise its value chain (prioritising local suppliers, sourced products, manufacturing, and distribution).

Certain industries have been optimistic about the trade talks. For one, the China Northern Rare Earth Group, Shenghe Resources, and China Rare Earth Resources and Technology have seen a 10% increase in their shares. American rare earth firms have also risen in New York trading. Certain US companies, such as Energy Fuels, also promised to boost American rare earths production as the Chinese market seems increasingly closed off.

Mining companies have also started to look elsewhere, beyond East Asia. Middle Eastern investments in critical minerals, namely, are increasingly popular. While the region is rich in copper, lithium, cobalt, nickel, and rare earths, and offers interesting opportunities to exploit, the equipment needed to extract the resources is not exactly attainable.

In the case of the global automotive industry that essentially relies on rare earths, it is still suffering from the Chinese export restrictions in April. Automotive suppliers see their export licences of Chinese rare earth magnets being substantially rejected, and the APEC trade talks have not necessarily lessened the blockages for now. Electric vehicle and hybrid drivetrains production has been significantly affected by the supply chain disruptions. The US and Australia pledged hundreds of millions in firm funding in refining, mining, and rare earth separation projects, yet these are simply short-term solutions to the overarching supply risk, and automobile companies are currently unable to meet global demands.

The Japanese and US agreement on establishing a cooperative framework on rare earth and critical minerals is a first step towards potentially aiding international companies in gaining autonomy from Chinese materials in the green energy and defence industries. The Japan Organisation for Metals and Energy Security (JOGMEC) did sign a memorandum with American company REAlloys in building a joint supply chain on rare earth processing technologies. However, underlying challenges announce a difficult transition for companies in the industry, namely in terms of refining and processing capacities, cost competitiveness, and environmental regulation.

Indeed, in terms of cost competitiveness, companies that once relied on Chinese mineral contributions are now seeking top pricing for their rare earths, specifically due to the risk of supply disruptions. Meanwhile, Chinese firms keep their domestic pricing stable, and the pricing differences have mainly affected firms interested in buying Chinese supplies of dysprosium, terbium, and samarium. Non-Chinese companies have also catalysed their valuation, aiming to stabilise their rare earth supply and delivery to international markets, including Energy Fuels, Ionic Rare Earths, Ucore, and Namibia Critical Metals.

Overall, the supply chain disruptions place companies utilising and manufacturing electric vehicles, wind turbines, defence technologies, and semiconductors at the highest risk. Such disruptions could mean higher input costs, material, equipment and production delays, and production cutbacks. States are pursuing suppliers outside of China, or “friend-shoring” for Western nations, yet such a transition is not economically competitive and will take years to scale. For now, Western companies affected by the supply disruptions seem to seek out subsidies and protective measures.