The US-China Tech Trade Framework: Navigating Supply Chain Shifts in Semiconductors and Rare Earths

The U.S.-China Tech Trade Framework, finalized in June 2025 after tense negotiations, marks a fragile detente in the world's most consequential trade dispute. While the agreement's specifics remain shrouded in ambiguity, its implications for the semiconductor and rare earth sectors are profound. For investors, the framework signals a critical inflection point: a 90-day window to reposition portfolios ahead of potential sector rebounds as supply chains stabilize.

The Framework's Dual Pillars: Semiconductors and Rare Earths

The agreement centers on two strategic battlegrounds: rare earth exports and semiconductor technology access. China's April 2025 imposition of rare earth export restrictions—critical for EV batteries, defense systems, and advanced manufacturing—had already triggered global supply chain panic. Meanwhile, U.S. export controls on semiconductor tools (e.g., ASML's EUV lithography systems) have stifled China's chip ambitions. The framework aims to soften these constraints, albeit tentatively.

The key takeaway? Supply chain reconfiguration is accelerating, but investors must parse which sectors and companies stand to gain from reduced volatility—and which remain vulnerable to lingering tariffs and geopolitical risks.

Semiconductor Sector: Equipment Firms Lead the Rebound

The semiconductor industry's fate hinges on the framework's ability to thaw U.S. export controls. While Washington has tightened restrictions on advanced chips and manufacturing tools, the agreement's “in principle” consensus could open doors for companies like ASML Holding NV (ASML) and Applied Materials (AMAT).

These firms dominate the supply chain for cutting-edge semiconductor equipment. If the U.S. eases controls on tools like EUV lithography—crucial for 3nm chips—ASML's sales to Chinese foundries like SMIC could surge. Similarly, Applied Materials' deposition and etching systems are indispensable for chip fabrication.

Investment Play:
- Long positions in semiconductor equipment stocks (ASML, AMAT, LRCX (Lam Research)) offer exposure to a potential recovery in demand.
- Avoid pure-play chip manufacturers like NVIDIA (NVDA) or Intel (INTC), which face prolonged headwinds from China's retaliatory tariffs on U.S. semiconductors.

Rare Earth Sector: U.S. Miners Poised to Fill the Gap

China's rare earth dominance—accounting for ~80% of global production—has long been a vulnerability for the U.S. The framework's implicit push for supply diversification benefits American miners like MP Materials (MP), the largest rare earth producer outside China.

MP's California-based operations are already scaling up production of neodymium and dysprosium, critical for EV motors and wind turbines. If China's export quotas ease, MP could gain pricing power, especially as U.S. tariffs on Chinese rare earths drop to 10% under the framework.

Investment Play:
- MP Materials (MP) is the primary beneficiary of U.S. rare earth diversification. Monitor its Q2 2025 production figures and any tariff-related margin improvements.
- China-focused miners like Northern Minerals (NOR) remain risky due to regulatory uncertainty.

Risks and Catalysts: The 90-Day Window Matters

The framework's success hinges on two deadlines:
1. July 9, 2025: U.S.-India trade talks could amplify pressure on China by solidifying New Delhi as a U.S. supply chain ally.
2. Leadership approval: Xi Jinping and Trump must endorse the deal by late June, a political hurdle given domestic hardliners in both nations.

If the agreement collapses, tariffs could resurge, and semiconductor stocks could face another rout. However, the 90-day window offers a unique opportunity: investors can take measured long positions in equipment firms and rare earth miners while hedging against volatility via options or inverse ETFs.

Conclusion: Position for Stability, Not Speculation

The U.S.-China Tech Trade Framework is neither a breakthrough nor a final resolution—it is a stopgap. Investors should focus on companies with structural advantages in supply chain resilience, such as equipment makers insulated from trade wars and rare earth miners capitalizing on U.S. demand.

Act decisively but cautiously. By mid-July, the framework's fate will clarify the path for sectors that are now stuck in limbo. The semiconductor and rare earth industries are betting on stability; investors should too.

Data as of June 6, 2025. Past performance does not guarantee future results. Consult with a financial advisor before making investment decisions.