Trump and Xi’s Kuala Lumpur meeting sees US-China tariff breakthrough, fuels rare earth hope for auto sector

Speaking to the press aboard Air Force One after his meeting with Xi Jinping, Trump alluded to a number of major developments in US-China trade relations that are likely to significantly impact automotive supply chains: the suspension of China’s “roadblock” on the supply of rare earth minerals; a delay on US Section 301 measures impacting China’s maritime, logistics and shipbuilding sectors; a reduction in tariffs imposed by the US on Chinese imports; and talks surrounding the supply of semiconductors.

Agreement on rare earth minerals

The first major announcement to come from Trump’s meeting with the Chinese president was, according to Trump, China agreed to continue the flow of rare earth, critical minerals and magnets to the rest of the world. In April this year, at the height of tariff escalation between the two countries, China introduced export controls on seven rare earth elements, which became subject to immediate licensing requirements.

These export controls raised concerns over bottlenecks for EV manufacturers in the US, with rare earth metals like dysprosium and terbium – two of the elements listed in China’s export controls – used in the manufacturing of high-performance EV motors. The uncertainty the supply of these metals and the speed of their shipments led to automotive manufacturers like Mercedes-Benz reportedly working with suppliers of rare earths to build “buffers” in case of potential shortages.

Read more: The US tariff timeline of trade tensions and tariff changes

Will 2025 be remembered as the year tariffs reshaped global trade? Automotive Logistics tracks all the latest tariff developments month by month in this timeline overview

Then in October, five more elements were put under export controls, used in automotive manufacturing for fibre optics and display panels.

But following his meeting with Xi Jinping, Trump claimed on social media that “China has agreed to continue the flow of rare earth, critical minerals, magnets, etc, openly and freely”. A spokesperson for China’s Ministry of Commerce (MOFCOM) confirmed that “China will suspend the implementation of relevant export control measures announced on October 9 for one year and will study and refine specific plans”.

The MOFCOM spokesperson added that in response, the US will itself suspend the implementation of a new rule announced on September 29 that expands its "entity-list" export restrictions to any entity that is at least 50% owned by one or more entities on the list.

With this apparent deescalation of export controls, particularly surrounding important materials for EV manufacturing, automakers in the US may be more hopeful of certainty surrounding the flow of rare earths from China going forward.

US maritime and logistics measures

Another matter that the two world leaders discussed was the US’ implementation of measures under its Section 301 investigation targeting China's maritime, logistics and shipbuilding industries.

Read more: US Trade Representative announces fee structure for vehicle and container deliveries by China-based shipping

The USTR announced in April that fees on China-related vessels calling at US ports will include a cost per car unit of $150 for finished vehicle carriers.

This investigation, which concluded in April, determined that China had been targeting these sectors for dominance and, a as a result, the US Trade Representative (USTR) laid out plans for introducing fees on China-based vessel owners and operators, operators of Chinese-built ships and foreign-built car carrier vessels in 2025. Then, in three years time, the US would introduce restrictions on transporting liquefied natural gas (LNG) via foreign vessels.

According to the MOFCOM spokesperson, it was agreed in Kuala Lumpur that the implementation of these measures would be suspended for one year, and in return China will “correspondingly suspend the implementation of its countermeasures against the US side for one year once the US suspension takes effect”. This news will likely come as a relief to Chinese exporters, with the US having imported $3.82 billion worth of motor cars and vehicles from China in 2024, according to data compiled by Trading Economics from the UN Comtrade database.

Semiconductor talks

Read more: Volvo Cars, VW and more warn about Nexperia chip shortage

Volvo Cars and VW have warned that the ongoing shortage in supply of Nexperia semiconductors could affect production.

In addition to this, Trump confirmed that the US discussed semiconductor chips with China, claiming that representatives from China will be “talking to Nvidia and others about taking chips”. Trump described the US government’s role in talks surrounding the sale of Nvidia chips in China as that of an “arbitrator or referee”, explaining his view that “that’s really between [China] and Nvidia.”

Since October 2022, AI semiconductor chips have been subject to increasingly tight export controls by the US Department of Commerce’s Bureau of Industry and Security, requiring licenses to be exported to China.

"We’re always hoping to return to China, and I think that Nvidia in China is very good,” Nvidia’s CEO Jenson Huang said following Trump’s meeting with Xi Jinping. “It’s in the best interest of United States, it’s in the best interest of China, so I’m hopeful that both governments will arrive at a conclusion someday where Nvidia’s technology could be exported to China."

These AI semiconductors, although not directly installed in vehicles, play a crucial role in automotive development and supply chains. They can be used in data centres to train AI models for sensor fusion, object detection and path planning. They can also be used to create digital twins of supply chain operations and support AI-enhanced supply chain optimisation.

Tariff adjustments

Another major announcement surrounded the tariff that Trump imposed on imports from China, Canada and Mexico on February 1, 2025 relating to the US’ fentanyl crisis. This 10% tariff, according to a White House fact sheet, was designed to hold these countries “accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs” from flowing into the US.

This rate was then increased on March 3 to 20% for imports from China, with Trump’s executive order cited China’s “failure… to act to blunt the sustained influx of synthetic opioids, including fentanyl, flowing from [China] to the United States”.

However, since meeting with Xi Jinping on October 30, Trump claims to be satisfied with China’s progress on this matter and, as a result, announced a return to the original 10% rate for imports from China.

“On fentanyl, we agreed that he was going to work very hard to stop the flow… I put a 20% tariff on China because of the fentanyl coming in, which is a big tariff, and based on the statements today, I reduced it by 10% – so it’s 10% instead of 20%, effective immediately,” Trump said.

This fentanyl-related tariff applies to all imports from China, and has been separate from “reciprocal” tariffs introduced as the US-China trade war escalated earlier this year. What this means for automotive supply chains is that US importers of parts and vehicles from, from today, will be subject to a lower tariff rate, reducing costs.

A trade deal in sight?

Trump suggested that a comprehensive trade deal with China could be coming “pretty soon”, which would certainly impact automotive supply chains all around the world. “We have not too many major stumbling blocks,” said Trump. “We have a deal [and] every year we’ll renegotiate the deal, but I think the deal will go on for a long time.”