Strategic Commodity Exposure and Geopolitical Leverage in a Prolonged U.S.-China Trade Truce

The U.S.-China trade truce, extended until November 10, 2025, has created a fragile but critical window for investors to recalibrate their exposure to strategic commodities and technology sectors. This pause in tariff escalations—reducing U.S. tariffs on Chinese goods to 30% and Chinese tariffs on U.S. goods to 10%—has temporarily stabilized supply chains for rare earths, semiconductors, and other critical materials. However, the underlying structural tensions between the two economic giants remain unresolved, creating both opportunities and risks for investors.

Rare Earths: A Chokepoint Resolved, but Uncertainty Lingers

The June 2025 agreement to resume rare earth exports from China to the U.S. marked a pivotal shift in trade negotiations. China's decision to expedite export licenses for rare earth magnets and other critical minerals alleviated immediate supply chain bottlenecks for industries such as electric vehicles (EVs), wind turbines, and defense systems. For example, Tesla and Ford reported reduced production delays, while MP Materials, a U.S. rare earth processor, saw increased demand for its neodymium oxide.

Yet, the resolution is temporary. China's export licensing process remains slow, favoring state-owned enterprises, and the truce expires in mid-August 2025. Investors must balance near-term relief with long-term risks, such as potential reimposition of export restrictions or geopolitical tensions reigniting. The MetalMiner's Monthly Metals Index (MMI) shows modest price stabilization in July and August 2025, but volatility could return if policy shifts occur.

Semiconductors: A Strategic Concession with Conditional Gains

The U.S. easing of export controls on advanced AI chips, such as Nvidia's H20, represents a calculated concession to secure access to rare earths. While this move benefits U.S. tech firms, it comes with strings attached: companies like Nvidia must now pay 15% of revenue from Chinese sales to the U.S. government. This monetization of trade policy introduces a new layer of uncertainty for semiconductor firms, as regulatory conditions could tighten again.

The VanEck Semiconductor ETF (SMH) has rebounded 18% in July 2025, reflecting optimism about AI-driven demand and supply chain stability. However, the ETF's top holdings—Nvidia (20.4%), TSMC (12.9%), and Broadcom (7.7%)—remain exposed to geopolitical risks. For instance, TSMC's role in manufacturing advanced chips for both U.S. and Chinese markets makes it a potential target for regulatory scrutiny.

Investors should monitor the sector's sensitivity to policy shifts, particularly as the U.S. seeks to balance technological leadership with strategic dependencies on Chinese materials.

U.S.-China Trade-Linked Equities: A Window for Positioning

The truce has created a unique opportunity for investors to position in sectors poised to benefit from stabilized trade flows. U.S. agricultural companies, such as Cargill, have seen a 36% surge in soybean exports to China, driven by Trump's push for increased purchases. However, this trend is contingent on China's willingness to avoid retaliatory tariffs, which could disrupt the sector.

Similarly, logistics and infrastructure firms are gaining traction as companies prioritize “just-in-case” inventory models and nearshoring. Prologis and Americold, for example, are expanding warehousing capacity in Vietnam, India, and Mexico to hedge against supply chain disruptions. The Inflation Reduction Act (IRA) further amplifies opportunities in clean energy, with tax credits driving demand for rare earths and semiconductors.

Strategic Recommendations for Investors

1. Diversify Exposure to Critical Minerals: Allocate to ETFs like the REMX (Rare Earth & Strategic Metals ETF) and individual companies with domestic production capabilities, such as MP Materials. These positions benefit from both near-term supply chain relief and long-term IRA-driven demand.
2. Hedge Semiconductor Sector Volatility: While the VanEck Semiconductor ETF (SMH) offers growth potential, investors should balance it with defensive assets like gold (GLD) or diversified energy ETFs to mitigate regulatory and geopolitical risks.
3. Monitor Trade Policy Indicators: Track U.S. soybean import data, China's rare earth export volumes, and developments on secondary tariffs. These metrics will signal whether the truce holds or if tensions escalate.
4. Prioritize Supply Chain Resilience: Invest in logistics providers and infrastructure developers with exposure to nearshoring and onshoring trends. Companies like Prologis and Americold are well-positioned to capitalize on the shift toward localized production.

Conclusion

The U.S.-China trade truce has bought time for investors to navigate a complex landscape of geopolitical leverage and commodity dependencies. While the immediate easing of tariffs and export restrictions provides a reprieve, the structural tensions between the two nations—particularly in semiconductors and rare earths—remain unresolved. By strategically positioning in resilient sectors and hedging against policy shifts, investors can capitalize on the current window of stability while preparing for potential volatility ahead.