The China-US Trade Truce: A Pivot Point for Rare Earth and Semiconductor Investors

The recent framework agreement between China and the U.S., finalized in June 2025, marks a critical turning point in global trade dynamics. For investors, this truce presents a window of opportunity to capitalize on stabilized supply chains in two strategic sectors: rare earth metals and semiconductors. With tariffs suspended, export controls relaxed, and a 90-day timeline to seal the deal, the stage is set for a reconfiguration of global supply chains. Here's how to position your portfolio ahead of the August 10 deadline—and beyond.

The Framework: A Temporary Truce, but Real Consequences

The agreement addresses two core issues: China's restrictions on rare earth exports and U.S. semiconductor software controls. Key takeaways:
- Rare Earth & Magnets: China has agreed to lift export curbs on critical minerals like neodymium (Nd) and praseodymium (Pr), which are vital for electric vehicle (EV) motors and defense systems. In return, the U.S. will remove retaliatory tariffs on Chinese goods and relax restrictions on semiconductor design tools.
- Tariff Suspension: A 90-day tariff truce will avert punitive tariffs (145% from the U.S., 125% from China), buying time for final negotiations. This truce must be ratified by both presidents by August 10.
- Market Impact: Global markets have already reacted positively. The FTSE 100 hit record highs, and Chinese stocks rose sharply. However, the World Bank warned that unresolved trade issues could keep 2025 global growth at just 2.3%.

Sector Breakdown: Where to Invest Now

Rare Earth Producers: Position for Stabilized Prices and Access

The truce removes a major supply chain bottleneck for EV manufacturers and tech firms. Rare earth prices, particularly for NdPr, had surged in recent years due to China's export limits. With the curbs lifted, prices should stabilize, reducing input costs for industries like EVs.

Top Plays:
- Chinese Miners: Companies like China Northern Rare Earth Group (ticker: 600111.SH) and Lynas Corporation (LYC.AX), a major Australian rare earth producer with Chinese ties, stand to benefit from increased demand and reduced price volatility.
- Western Miners: U.S.-listed firms such as MP Materials (MP.US), the largest rare earth producer outside China, could see gains as investors bet on long-term diversification away from China.

Semiconductor Equipment: A Bridge to Global Chip Manufacturing

The U.S. agreed to ease restrictions on semiconductor design software and tools, enabling companies like ASML Holding (ASML.US) and Applied Materials (AMAT.US) to regain access to Chinese markets. This is a boon for chipmakers worldwide, as ASML's extreme ultraviolet (EUV) lithography tools are irreplaceable for advanced chips.

Key Catalysts:
- Market Access: ASML's sales to Chinese customers, which had been hindered by U.S. export controls, could rebound.
- Global Production: Easier access to tools and rare earth-based magnets (critical for chip manufacturing equipment) could accelerate chip production, easing the global shortage.

Risks and Hurdles: Why Caution Still Matters

While the truce is a win for supply chain stability, risks remain:
- Approval Risks: President Trump's history of abrupt policy shifts and Xi's demands for structural changes to U.S. trade practices could derail the deal.
- Geopolitical Tensions: Taiwan and China's state-driven economy remain unresolved issues. Even if the truce holds, long-term competition over tech dominance will persist.
- Enforcement Gaps: The agreement's success hinges on specifics—such as exact export lists and penalties for violations—that have yet to be finalized.

Investment Strategy: Play Both Sides of the 90-Day Window

• Short-Term (Pre-August 10):
• Buy rare earth miners: Take positions in companies like MP Materials and Lynas, leveraging the price stabilization effect.
• Semiconductor tools: Invest in ASML and Applied Materials, anticipating a surge in orders from Chinese chipmakers.
• Hedge with Options: Use put options on semiconductor stocks to mitigate downside risk if the truce fails.
• Long-Term Play:
• Diversification Themes: Look for companies investing in rare earth mines outside China (e.g., Australia's Arafura Resources or U.S. projects) and semiconductor R&D partnerships with non-Chinese suppliers.

Conclusion: A Truce, Not a Treaty—but a Strategic Opportunity

The China-U.S. framework is far from a permanent solution. However, for investors willing to act decisively, the 90-day window offers a chance to profit from supply chain normalization. The rare earth and semiconductor sectors, in particular, are at the forefront of this shift. While geopolitical risks linger, the truce's success could redefine global manufacturing for years to come. Position now—but stay vigilant.

The clock is ticking. The question isn't whether to act—it's how to act smartly.