Navigating the China-US Trade Crossroads: Rare Earths, Vietnam, and the Path to Supply Chain Resilience

The escalating tensions between China and the U.S. over tariffs and rare earth exports have created a volatile backdrop for global supply chains. As both nations leverage strategic materials as economic weapons, investors must pivot toward industries and geographies positioned to thrive in this new reality. Vietnam's surging trade volumes, rare earth reserves, and growing EV manufacturing sector are emerging as critical pivots for diversification. Here's how to capitalize on the shifting landscape.

The China-US Trade Standoff: A New Era of Volatility

The temporary tariff truce between China and the U.S., agreed in May 2025, has done little to quell underlying tensions. U.S. tariffs on Chinese goods remain at 51.1%, while China's retaliatory tariffs hover at 32.6%, with both sides accusing each other of violating terms. The focal point now is rare earth exports, which are central to industries from defense to EV production. China's April 2025 restrictions on seven heavy rare earth elements—critical for high-performance magnets—have exposed vulnerabilities in U.S. supply chains, with prices for controlled materials spiking by 30% in Q2 alone.

The 90-day truce (expiring in July 2025) hinges on resolving disputes over rare earth export rates and U.S. chip restrictions. Investors should monitor negotiations closely, as outcomes could trigger abrupt shifts in trade flows. A failure to extend the truce would likely see tariffs rise again, creating opportunities for companies positioned to sidestep China's dominance.

Rare Earths: The New Geopolitical Battleground

China's near-monopoly on rare earth refining—accounting for 92% of global capacity—has turned these minerals into a geopolitical lever. The U.S. is scrambling to diversify supply chains, but progress remains uneven. Domestic efforts like MP Materials' Texas magnet plant (targeting 1,000 tons/year by late 2025) are nascent compared to China's 138,000-ton annual output.

The U.S. is also incentivizing partnerships with non-Chinese producers. Australia's Lynas Corporation, for instance, aims to double rare earth production by 2026, while Japan's Toyota and Hitachi have invested in Vietnam's nascent mining sector. These alliances are critical for reducing reliance on Chinese refining—a process protected by strict export controls and technical expertise.

Vietnam: The Pivotal Supply Chain Hub

Vietnam's rare earth reserves rank second globally (22 million tons), yet its production capacity remains underdeveloped. Exports surged to $137 million in the first ten months of 2024, with projections of $220 million by year-end . This growth is driven by strategic partnerships and geopolitical calculus:- EV Manufacturing: VinFast's 500,000-unit/year EV capacity by 2025 relies on batteries produced with Vietnamese rare earth oxides and Chinese technology. The company's U.S. plant, slated for 2028, could become a tariff-resistant gateway to the North American market.- Strategic Alliances: Vietnam's $15 billion infrastructure plan (including port expansions) supports export logistics, while free trade agreements like RCEP and CPTPP reduce trade barriers. Partnerships with Japan's Shin-Etsu Chemical and Australia's Lynas Rare Earths are modernizing mining and refining processes.- Geopolitical Leverage: By positioning itself as a rare earth supplier outside China's orbit, Vietnam attracts U.S. investment and diplomatic support. The U.S.-Vietnam MOU on rare earth development underscores this strategic alignment.

Investment Strategies: Frontloading and Long-Term Resilience

Investors should adopt a dual approach to capitalize on these dynamics:

Short-Term Plays: Frontloading Before Tariff Resets

• Vietnamese Exporters: Companies like Integral Materials Investment Vietnam Co. (a major rare earth exporter) and VinFast (EV manufacturer) benefit from surging trade volumes. Monitor their stock performance as the July truce deadline approaches—frontloading orders ahead of potential tariff hikes could boost near-term earnings.
• U.S. Tech Partnerships: Firms like MP Materials (U.S. rare earth processor) and Lynas USA (expanding non-Chinese refining) are beneficiaries of Defense Production Act grants. Their stocks may see a pop if the truce collapses and urgency for diversification intensifies.

Long-Term Bets: Building Tariff-Resistant Supply Chains

• Rare Earth Mining in Vietnam: Investors should look to Vietnam's underdeveloped rare earth reserves. While projects like the Dong Pao mine face regulatory hurdles, successful partnerships with Australian or Japanese firms could unlock value.
• EV Supply Chain Diversification: Companies like LG Chem (battery maker with Vietnamese operations) and Samsung SDI (expanding in Southeast Asia) are reducing China dependency. Their stocks align with the global shift toward regionalized production hubs.
• Recycling and Substitution Technologies: Firms like Apple (recycling rare earths in devices) and Umicore (specializing in urban mining) offer a hedge against scarcity. These companies benefit from rising raw material prices and regulatory pushes for circular economies.

Risks and Considerations

• Geopolitical Uncertainty: Vietnam's reliance on Chinese refining (even for Australian-sourced oxides) limits its independence. Investors must weigh progress against ongoing supply chain gaps.
• Environmental Scrutiny: Rare earth mining's environmental toll—pollution from solvent extraction—could trigger regulatory blowback. Firms prioritizing green technologies (e.g., Tesla's lithium recycling partnerships) are safer bets.
• Market Saturation: Vietnam's rare earth export growth could plateau if global EV demand slows or if China relaxes restrictions. Diversification into other sectors (e.g., Vietnam's $454 billion export target for 2025) is essential.

Conclusion: Positioning for the New Supply Chain Reality

The China-U.S. trade war has turned rare earths into a defining battleground for supply chain resilience. Vietnam's strategic location, abundant reserves, and growing EV sector make it a linchpin for diversification. Investors should blend short-term opportunism (frontloading plays on tariffs) with long-term bets on companies building sustainable, China-free supply chains. As the July truce deadline looms, the race is on to secure positions in this increasingly zero-sum game.

The path to supply chain resilience lies in recognizing that volatility is the new normal—and the winners will be those who adapt first.