How China’s Rare-Earths Control Defined Tentative Trade Deal With U.S.

Summary

WSJ What’s News: How China’s Rare-Earths Control Defined Tentative Trade Deal With U.S.

Release Date: June 11, 2025

Host: Alex Osola, The Wall Street Journal

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US-China Trade Deal Hinges on Rare Earths Control

In the latest episode of WSJ’s What’s News, host Alex Osola delves into the critical elements shaping the tentative trade deal between the United States and China, with a particular focus on China’s strategic control over rare-earth magnets.

Rare Earths as a Lever in Trade Negotiations

Gavin Bade, an economic policy reporter for the Wall Street Journal, provides insightful analysis on the pivotal role rare-earth magnets played in reigniting US-China trade negotiations. Speaking at [00:38], Bade highlights, “With the U.S., I don't think there's a lot of clarity for businesses… they will have to be watching this issue going forward.” He elaborates that China’s decision earlier in the year to reduce exports of these essential components for several months was the catalyst for the expedited talks in London.

Details of the Tentative Trade Agreement

At [02:34], Bade explains the nuances of the newly brokered deal: “Basically, this is a non-tariff deal. All of the tariff stuff has stayed the same since Geneva… this deal brings us back to square one where we were in May.” The agreement primarily focuses on securing six months of rare earth magnet exports to the US, a move China likely views as temporary. Bade anticipates ongoing negotiations to ensure tariffs remain stable beyond the initial 90-day period, noting, “this is just the next chapter in this cycle that we see of escalation, de-escalation.”

Implications for US Industries

The scarcity of rare-earth magnets poses significant risks for various US industries, including automotive and defense sectors. Bade emphasizes the urgency for businesses to monitor the situation closely, stating, “the auto companies aren't going to have to shut down plants tomorrow, but certainly they're going to have to be watching this issue going forward” ([03:22]).

US Inflation Data and Federal Reserve’s Future Moves

Switching gears, the episode addresses the latest US inflation figures and their implications for the Federal Reserve’s monetary policy.

Inflation Trends and Economic Indicators

The Labor Department reported a 2.4% year-over-year increase in consumer prices for May, slightly up from April’s 2.3% ([04:25]). Core inflation, which excludes volatile food and energy prices, rose by 2.8%, remaining below economists' forecasts. Spencer Jacob, a WSJ investing columnist, discusses at [04:59], “no one expects them to do anything” regarding interest rate changes at the upcoming Fed meeting, given the stronger-than-expected economic data.

Political Pressures on the Fed

Jacob further comments on political influences, noting, “political pressure at the moment doesn't factor into their decision at all” ([05:39]). He explains that while President Trump has publicly urged the Fed to lower interest rates, the institution maintains its independence. However, Trump’s pressure could impact future appointments to the Fed’s leadership, potentially shaping long-term monetary policy.

Nationwide Protests Against Immigration Enforcement

The episode also covers the escalating protests against immigration enforcement across the United States and the government's response.

Deployment of National Guard in Texas

Texas Governor Greg Abbott announced the deployment of the National Guard in response to widespread anti-ICE (Immigration and Customs Enforcement) protests ([07:00]). This decision follows violent clashes in Austin, where protesters were met with tear gas and pepper spray near the state Capitol.

Home Depot's Role Amid the Protests

Sarah Nassauer, a WSJ reporter covering large retailers, sheds light on Home Depot's involvement. At [09:47], Nassauer explains, “This sort of symbiotic but somewhat contentious relationship has existed for decades between day laborers and Home Depot.” The company faces criticism for inadvertently becoming a focal point in the immigration enforcement crackdown, especially after ICE raids targeted stores in predominantly Latino neighborhoods.

Nassauer adds, “They are issuing some guidance to stores… if a worker doesn't feel comfortable sticking around for the day, they can leave and still be paid” ([09:49]). This policy aims to ensure the safety of employees while navigating the complex dynamics between the company and day laborers seeking work.

Other Notable Headlines

Elon Musk and President Trump’s Feud

Elon Musk has recently sought to de-escalate his public disagreements with President Trump. In a post on X ([11:20]), Musk expressed regret over his previous remarks about the president, stating, “they went too far.” Sources indicate that high-ranking officials, including Vice President J.D. Vance and White House Chief of Staff Susie Wiles, intervened to broker peace between the two figures.

Harvey Weinstein’s Retrial Verdict

In legal news, Harvey Weinstein was found guilty of one count of sexual assault and acquitted on another during his retrial in New York ([11:20]). This mixed verdict follows two trials and numerous allegations against the former Hollywood mogul, marking a significant moment in his long-standing legal battles.

Tennessee Lawsuit Against Education Funding Program

A federal lawsuit filed in Tennessee challenges a Department of Education program allegedly funneling funds to colleges with high Hispanic student populations. The state, represented by Students for Fair Admissions (SFFA), argues that the program is both racist and unconstitutional. Edward Bloom, president of SFFA, leads the charge against the US Department of Education, though no comment was available from the department at the time of reporting ([11:20]).

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Conclusion

This episode of What’s News offers a comprehensive overview of the intricate US-China trade negotiations centered around rare-earth magnets, the current state of US inflation and its impact on Federal Reserve policies, and the nationwide response to immigration enforcement crackdowns. Additionally, it touches on significant legal and political developments, providing listeners with a well-rounded understanding of the key issues shaping today's headlines.

Produced by Anthony Banci and Pierre Bienname, with supervising producer Michael Cosmides, Alex Osola ensures that listeners are well-informed about the most pressing news stories affecting the global landscape.

Transcript

[Gavin Bade]

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[Alex Osola]

How China's hold on rare earths dictated the path towards a tentative trade deal.

[Gavin Bade]

With the U.S. i don't think there's a lot of clarity for businesses. What you can say is the auto companies aren't going to have to shut down plants tomorrow, but certainly they're going to have to be watching this issue going forward.

[Alex Osola]

Plus, US Inflation was muted in May, defying fears that President Trump's tariffs would drive up prices. And the governor of Texas plans to deploy the National Guard as protests against immigration enforcement spread spread across the country. It's Wednesday, June 11th. I'm Alex Osila for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world today. President Trump said today that the US And China had agreed on terms for a truce on trade. As we reported this morning, the framework for the deal which the US And China negotiated over two days in London this week and hinged on access to China's exports of rare earth magnets, coin sized components that are indispensable for powering car motors, industrial robots and missile guidance systems. An administration official confirmed that tariffs will stay at levels agreed to in the deal signed in Geneva last month. Gavin Bade covers economic policy for the Journal and is here to tell us more. Gavin, earlier this year China decided to cut back on exports of rare earth magnets for a few months. What role did that play in bringing the US And China back to the bargaining table?

[Gavin Bade]

It was really the driving force behind these very hastily arranged negotiations. In London this week we heard not only defense contractors and military applications companies complaining about this, but also large US Automakers were in the White House as a year saying if we don't solve this export license problem with the rare earth magnets, we may need to shut down production on a large scale like pandemic style disruptions to their operations.

[Alex Osola]

What does this new deal include and how is this different from the one that was signed last month in Geneva?

[Gavin Bade]

Basically this is a non tariff deal. All of the tariff stuff has stayed the same since Geneva and basically this deal brings us back to square one where we were in May and I expect that means that the sides will need to Continue talking just to make sure that either side is not going to see higher tariffs at the end of this 90 day period, which we think is still operable, although the administration has not cleared that up for us yet. And then there's always the, the opportunity for someone to ratchet up these export controls again. And so this is just the next chapter in this cycle that we see of escalation, de escalation. And we will only see that more going forward.

[Alex Osola]

What is China getting in return here? As we heard from people familiar with the matter, it limited the easing of rare earth export licenses for US Manufacturers to six months. Why is that?

[Gavin Bade]

What they're getting in return is the relaxation of some of the recent export controls. Not the ones on leading edge chips, not the things or the software needed to make those chips. So not the things that China has been complaining about for a long time, but these new recent and not publicly announced export controls over things like jet engines. We had gone and taken a scalpel and really looked at places where they had a vulnerability similar to they were doing with the rare earth licenses. And so it's not unreasonable to expect that the Chinese government would not just agree to something indefinitely with the Trump administration. They would say, okay, we'll do these licenses for six months and then we'll maybe check back in and make sure everything is still going well. So what we just see is another momentary detente. I don't think there's a lot of clarity for businesses as well. What you can say is the auto companies aren't going to have to shut down plants tomorrow, but certainly they're going to have to be watching this issue going forward.

[Alex Osola]

That was WSJ reporter Gavin Bade. Thank you, Gavin.

[Gavin Bade]

Thanks Alex. Always a pleasure.

[Alex Osola]

The Labor Department said today that consumer prices were up 2.4% in May from a year earlier. That's hotter than April's gain of 2.3%. But in line with economists expectations, the so called core measure. Economists watch in an effort to better capture inflation's underlying trend, prices excluding food and energy categories rose 2.8% below forecasts. For more I'm joined by WSJ investing columnist Spencer Jacob. Spencer, what does this inflation data mean for the Fed, especially given the latest jobs report out Friday that showed that hiring some load last month.

[Spencer Jacob]

So there's a Fed meeting next week where basically no one expects them to do anything. And also because a lot of the other economic data has been good so far more than inflation. What we need to watch are signs of softness in the economy. You've had a lot of surveys that have pointed to trepidation in terms of companies investing, pessimism by consumers. But that's just what people say, what people do and how many people are hired. They that's what the Fed really cares about.

[Alex Osola]

President Trump has already been pressuring the Fed to lower interest rates. This morning, in fact, he posted on social media about the consumer Price Index and urged the Fed to lower interest rates by a full point. How does that factor into the Fed's decision?

[Spencer Jacob]

Well, political pressure at the moment doesn't factor into their decision at all. The Fed needs to show that it is independent. It can't be seen taking orders from politicians, whether it's Congress or the White House at all. There's another thing at play here, too, which is not what the Fed does in the next several months because Trump is pressuring them, but also what people think the Fed will do when he appoints the next Fed chair because that person will have influence over rates. And since he's so explicitly urging them to do that, if there's some speculation about who that person might be and whether they might be more willing to be looser with monetary policy that will affect market expectations in and of itself.

[Alex Osola]

That was WSJ investing columnist Spencer Jacob. Thank you, Spencer.

[Spencer Jacob]

Thank you.

[Alex Osola]

Bond investors liked that latest read on inflation. In recent trading, U.S. government bonds staged a big rally, dragging the yield on 10 year treasury notes down to about 4.42%. Major US indexes fell slightly today. The S&P 500 dropped about 0.3%, the Nasdaq dipped 0.5% and the Dow stayed flat. Gold has emerged as the real rival to the dollar's reserve status. It has surpassed the euro as the second largest global reserve asset at market prices last year. A report out today from the European Central bank highlighted the shifts underway in the portfolios of global central banks. At the end of 2024, gold bullion made up around 20% of global official reserves, overtaking the euro 16%. The increased share was driven by a combination of central bank stockpiling and record high gold prices. Coming up, protests against immigration enforcement have spread. How Home Depot found itself in the middle of the debate. That's after the break. Summer's here and Nordstrom has everything you need for your best dress season ever, from beach days and weddings to weekend getaways. In your everyday wardrobe, discover stylish options under $100 from tons of your favorite brands like Mango Skims, Princess Polly and Madewell. It's easy, too, with free shipping and free returns in store order pickup and more. Shop today in stores [e-mail] or download the Nordstrom app. Texas Governor Greg Abbott said he would deploy the National Guard across parts of the state as anti ICE protests that have gripped Los Angeles since Friday spread across the country. The move came ahead of a planned protest in San Antonio expected today, two days after protesters in Austin were met with tear gas and pepper spray projectiles near the state Capitol. Local organizers in several other cities, including New York, Las Vegas, Seattle and Minneapolis, said they were planning protests for today. Already, hundreds of protesters have been arrested in demonstrations across the country. Meanwhile, one company that has found itself in the middle of the debate around the immigration crackdown is Home Depot. Immigration agents conducted a sweet Friday at a strip mall that includes a Home Depot in the predominantly Latino neighborhood of Westlake in Los Angeles, setting off days of protests around Los Angeles County. For more, I'm joined by Sarah Nassauer, who covers large retailers for the Journal. Sarah, how did the company find itself at the center of all of this? Let's start by digging into this relationship between Home Depot and the day laborers who often show up outside at stores for work.

[Sarah Nassauer]

This sort of symbiotic but somewhat contentious relationship has existed for decades between day laborers and Home Depot and other informal places across the country. But the Trump administration and specifically Stephen Miller, the Wall Street Journal has reported last month wanted to step up its enforcement actions. And one of the suggestions he had in a meeting with ICE officials was just go to Home Depot, just go to 7 11. We need to branch out from targeting criminals. We need to round up more people. Basically.

[Alex Osola]

What is the company saying about this?

[Sarah Nassauer]

A spokeswoman said yesterday that they are not involved. They don't know when an immigration enforcement action is coming to the area of their store. They aren't coordinating, but that they are issuing some guidance to stores. For example, in the Los Angeles area, where a lot of this activity has been focused so far, that those store workers and managers should report when this happens to corporate. They want to track what's going on as well as not get involved for their own safety. And they said they have a policy that if a worker doesn't feel comfortable sticking around for the day, they can leave and still be paid.

[Alex Osola]

What does all of this mean for Home Depot's business?

[Sarah Nassauer]

That part's a little unclear and to me is really fascinating. It has been decades that Home Depot is a known spot for day laborers to hang out and look for daily work. The company does not explicitly endorse it. They have a no solicitation policy. They say this has been contentious, though some people have criticized Home Depot over the years for potentially enabling illegal immigration. Other people have criticized Home Depot over the years for not treating those workers well. And so they've been criticized from all sides. And it's unclear how this will affect their business. But it's clearly something that is a piece of how people that come to Home Depot, at least in some cities, see, like the benefit, like I might be able to get a worker who can come and help on this job I'm working on today.

[Alex Osola]

That was WSJ reporter Sarah Nassauer. Thank you, Sarah.

[Sarah Nassauer]

Thanks for having me.

[Alex Osola]

In other news, Elon Musk has de escalated his war of words with President Trump. Writing on X this morning, he said that he regretted some of his posts about the president last week and said, quote, they went too far. We're exclusively reporting that. According to people familiar with the matter, Vice President J.D. vance and White House Chief of Staff Susie Wiles urged Musk to put an end to the feud in a call last Friday. Harvey Weinstein has been found guilty of one count of sexual assault and acquitted on another in his sex crimes retrial in New York. The mixed verdict comes after two trials and dozens of allegations against the former Hollywood producer. The jury couldn't reach consensus on a rape charge, and deliberations will resume tomorrow. Weinstein was tried and convicted on similar sex crimes in 2020, but New York's highest court overturned that conviction last year. And a lawsuit filed in federal court in Tennessee today seeks to end a program designed to funnel tens of millions of dollars to colleges and universities with a large percentage of Hispanic students charging it is racist and unconstitutional. The suit was filed by the state of Tennessee, an advocacy group, Students for Fair Admissions, against the US Department of Education. The president of sffa, Edward Bloom, spearheaded the Harvard case. The Education Department didn't immediately respond to a request for comment. And that's what's news for this Wednesday afternoon. Today's show is produced by Anthony Banci and Pierre Bienname with supervising producer Michael Cosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.