China to limit rare earth export licenses to the U.S. to six months

China has capped its rare earth exports to US automakers and manufacturers at just six months, throwing a wrench into global supply expectations and giving Beijing a tactical edge if talks fall apart again.

This was confirmed after two days of tense meetings in London between Chinese officials and their American counterparts, according to a report from the Wall Street Journal.

The decision comes after a fragile trade deal was drawn up in Geneva last month but never fully settled. The temporary approval of export licenses is part of a broader agreement still waiting for the signatures of President Donald Trump and President Xi Jinping. If both leaders sign off, companies in the US could begin receiving rare earth shipments within a week.

US agrees to roll back jet engine and ethane controls

To make this six-month window possible, the US negotiating team agreed to scale back export restrictions on several high-tech components and materials that China had previously been blocked from buying. These include jet engines, engine parts, and ethane—a key ingredient in the production of plastics.

One individual familiar with the deal said the process for US firms to apply for rare earth export licenses would begin immediately. But none of it moves forward without a final greenlight from both Trump and Xi. “FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UP FRONT, BY CHINA,” Trump wrote Wednesday on Truth Social, signaling that the deal is done pending executive approval.

The rare earths at stake are the kind used in electric vehicles, wind turbines, consumer electronics, and military hardware. While the agreement sounds like a step forward, the six-month expiration creates more uncertainty than clarity. Officials in Beijing have made it clear they intend to keep their grip on the supply as a bargaining chip in future talks.

Rare earths stay weaponized as Asia moves away from the dollar

Negotiations in London only happened because both sides accused each other of not holding up the Geneva deal. Trump’s team claimed China was deliberately stalling license approvals. Beijing hit back, saying the US had sabotaged the agreement first. The blame game didn’t stop the talks, but it’s exactly why this license deal has an expiration date baked into it.

While all of that was happening, the broader financial picture was shifting, too. Asian economies are making clear moves to cut their dependence on the US dollar, citing volatility, political risk, and economic weaponization. The Association of Southeast Asian Nations (ASEAN) unveiled a strategic plan that will run through 2030, encouraging trade in local currencies to reduce FX shocks and avoid the fallout of unpredictable US policies.

The world’s reserves of US dollars are already shrinking. Back in 2000, dollars made up over 70% of global reserves. As of 2024, that number has dropped to 57.8%. The greenback has also taken a beating this year, with the dollar index losing more than 8% in value just since January. The April nosedive came after messy US policymaking triggered widespread selloffs.

Mitul Kotecha, head of FX and emerging market strategy at Barclays Asia, said on CNBC that governments are no longer ignoring the fact that the dollar is being used as a weapon. “Countries are looking at the fact that the dollar has been, and can be used as a sort of weapon on trade, direct sanctions, etc… That’s been the real change, I think, in the last several months,” he said.

Lin Li, head of global markets research for Asia at MUFG, added that de-dollarization is accelerating. He said many Asian countries now want to rely on their own currencies to cut exposure to dollar-related risk. That shift matters because it could affect how future China-US trade deals are structured, especially when tied to commodities and cross-border payments.

This rare earth deal is just one chapter, not the end of the book. Officials close to President Xi want to preserve China’s leverage by keeping control of rare earths tight. The US response, for now, has been to trade tech exports for raw materials. Whether that gamble pays off depends on what happens next week—and how long both sides can pretend six months is enough.

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