Trade Truce or Tactical Shift? How the U.S.-China Deal Reshapes Rare Earth and Semiconductor Investing

The U.S.-China trade framework agreement reached in June 2025 marks a pivotal, if temporary, detente in a years-long conflict over critical minerals and advanced technology. With a 90-day window to ratify a deal that could stabilize rare earth mineral supplies and semiconductor production, investors now face a high-stakes opportunity to position for sectors at the heart of global manufacturing and defense systems.

The Rare Earth Gamble: A Truce with Teeth?
The agreement's most immediate impact centers on rare earth minerals—17 elements essential for electric vehicles, wind turbines, and military hardware. China, which controls 85% of global rare earth refining capacity, agreed to lift export curbs on critical metals like neodymium (Nd), praseodymium (Pr), and dysprosium. In exchange, the U.S. will remove retaliatory tariffs on Chinese goods and ease restrictions on semiconductor design tools.

This truce is a lifeline for industries like EV manufacturing, where rare earth prices had surged 40% in 2024 due to supply bottlenecks. . Companies like MP Materials (MP)—the sole U.S. processor of rare earth oxides—stand to gain as demand stabilizes. Meanwhile, Australian miner Lynas Corporation (LYC.AX), which supplies 25% of global light rare earths, could see its market position strengthen if the deal holds.

Investors should note that the agreement's success hinges on its August 10th ratification deadline. A failure to secure approval could reignite price volatility, as China's export restrictions have historically been used as a geopolitical tool. For now, the truce creates a “buy the dip” scenario for miners with diversified supply chains.

Semiconductors: A Race Against the Clock
The semiconductor sector gains access to Chinese markets for advanced equipment, a reversal of U.S. export controls that had stifled chip production. Firms like ASML Holding (ASML)—monopolist of extreme ultraviolet (EUV) lithography tools critical for 7nm chips—and Applied Materials (AMAT), which supplies etching systems, are poised to benefit. Chinese chipmaker Semiconductor Manufacturing International Corporation (SMIC) could accelerate its 7nm process development, reducing reliance on Taiwan's TSMC.

Yet risks remain. The agreement does not resolve the broader U.S.-China tech rivalry; SMIC still faces U.S. sanctions on advanced node production. Investors should pair semiconductor exposure with hedges like put options on ASML or the VanEck Semiconductor ETF (SMH).

The Geopolitical Elephant in the Room
While the agreement's 90-day window offers tactical gains, long-term risks loom. The deal's fate rests on two unpredictable leaders: a U.S. president with a history of reversing trade policies and a Chinese regime pushing for structural changes to U.S. trade practices. Ongoing disputes over Taiwan's status and China's state-driven economy ensure that geopolitical tensions will persist even if the truce is ratified.

For investors, this means prioritizing companies with geopolitical diversification:
- Rare earth miners with projects outside China, such as Australia's Arafura Resources or U.S.-based Alkane Resources (AKE).
- Semiconductor firms with R&D partnerships in non-Chinese markets, like Intel's (INTC) collaboration with South Korea's SK Hynix.

Investment Strategy: A Two-Pronged Approach
Short-Term (Pre-August 10):
- Go Long on Truce Winners: Allocate 20% of a tech portfolio to SMH and XLI industrial ETFs for diversified exposure.
- Target Specific Plays: Buy ASML and MP, but pair with 10% put options to mitigate upside/downside risks.

Long-Term (Post-August 10):
- Focus on Diversification: Shift to miners like Arafura and semiconductor toolmakers with global supply chains.
- Monitor Policy Shifts: Track the World Bank's GDP forecasts and rare earth price indices for signs of supply chain stabilization.

Conclusion: A Truce, Not a Peace Treaty
The June agreement is best viewed as a tactical pause in a strategic rivalry. Investors who bet on rare earth and semiconductor sectors must balance optimism over stabilized supply chains with vigilance about unresolved geopolitical tensions. The August 10th deadline is a critical inflection point—cross it, and the truce could redefine manufacturing dynamics for years. Miss it, and markets may revert to a race for resource independence, favoring firms with the most diversified and resilient supply chains.

In either case, the path forward is clear: invest in companies that control critical minerals or advanced technologies—and keep one eye on the geopolitical horizon.