US-China Trade Talks: A Pivot Point for EV Supply Chains

The June 9, 2025, US-China trade talks in London mark a critical juncture for investors in the electric vehicle (EV) sector. With tariffs on EV components and critical minerals still elevated, the outcome of these negotiations could unlock significant value for automakers, battery suppliers, and mining firms exposed to lithium, cobalt, and rare earth metals. Here's why investors should pay close attention—and how to position portfolios ahead of the talks.

The Tariff Tightrope: EVs and Critical Minerals at the Heart of the Talks

The stakes are enormous. The US retains a 25% tariff on imported EVs and auto parts, while China's export controls on rare earth elements—a cornerstone of EV batteries and semiconductors—remain intact. The 90-day tariff truce agreed in Geneva on May 12, which reduced broader tariffs to 30% from 145%, excluded EVs and critical minerals. This leaves the door open for a breakthrough:

• Short-Term Catalyst: If the June talks extend the 90-day deal or reduce EV tariffs, automakers like Tesla (TSLA) and its suppliers (e.g., Panasonic in batteries, LG Chem in EV components) could see immediate cost relief.
• Long-Term Gain: A resolution on critical minerals—specifically rare earths and lithium—would stabilize supply chains, easing bottlenecks for EV manufacturers.

Critical Minerals: The New Oil of the EV Era

China's near-monopoly on rare earth processing (90% of global capacity) has long been a strategic vulnerability for the US and Europe. The talks aim to address this imbalance:

1. Lithium and Cobalt: Mining firms with reserves—such as Pilbara Minerals (ASX:PLS) and IGO Limited (ASX:IGO)—could benefit if China eases export restrictions. Lithium prices, which dropped 40% in 2024 due to oversupply fears, might stabilize if trade tensions ease.
2. Rare Earths: US efforts to build domestic refining capacity, like the $439M Department of Defense initiative, remain nascent. A breakthrough in export licenses could temporarily reduce reliance on Chinese suppliers.

Investment Thesis: Overweight EV Supply Chains

The market is pricing in disappointment. EV stocks have underperformed broader indices in 2025, with Tesla's valuation dropping 20% YTD amid production delays and trade war jitters. But a positive outcome from the June talks could catalyze a reversal:

• Top Picks:
• Battery Suppliers: Cathode producers (e.g., Contemporary Amperex Technology CATL) and cathode material firms (e.g., Albemarle Corp (ALB), a lithium leader) stand to gain from lower input costs.
• Critical Mineral Miners: Southern Copper (SCCO) and First Quantum Minerals (FMG) have cobalt exposure, while Livent (LVNT) focuses on lithium.

• Auto OEMs: Li Auto (LI) and Nio (NIO) could see margin improvements if tariffs on imported components are reduced.

• Risk Management: Diversify into dividend-paying miners (e.g., BHP Group (BHP)) for stability.

The Bigger Picture: Decoupling vs. Collaboration

While the US and China are unlikely to fully resolve their tech trade disputes, even incremental progress on EVs and critical minerals could reset investor sentiment. The Inflation Reduction Act and EU's Critical Raw Materials Act aim to reduce reliance on China over the next decade—but success hinges on stable trade frameworks.

In the near term, bet on sector rotation into EV supply chains ahead of the talks. If tariffs are cut or critical mineral access improves, the gains could be swift. Even a modest deal extension beyond July's deadline would justify overweight allocations.

The EV revolution isn't just about innovation—it's a geopolitical chess match. Investors who recognize this and position early could capture outsized rewards.

Final Call: Overweight EV supply chain equities. Monitor June 9 talks closely—this is a make-or-break moment for global electrification.