After years of escalating tariffs, the US and China struck a truce on June 11, 2026, but it’s a pause, not peace. The fight over trade, technology, rare earth minerals, and military influence is far from over, and the next six months will decide whether it gets worse.
What is happening?
The US and China have spent over a year locked in an escalating tariff war that briefly pushed both economies into near-shutdown territory on bilateral trade. On June 11, Trump announced a deal that leaves in place a 20 percent “fentanyl” tariff and a 10 percent “reciprocal” tariff, for a combined 30 percent, while pausing any higher tariffs for 60 days. That sounds like a resolution, but it isn’t. Average US tariffs on Chinese exports still stand at 47.5 percent and cover 100 percent of all goods, while China’s average tariffs on US exports sit at 31.9 percent and also cover everything Americans sell into the Chinese market. Both governments have simply agreed to stop raising the stakes for now, not to lower them in any meaningful way.
Tensions flared again just days before the truce was announced. On June 9, the US added Alibaba and other major Chinese tech firms, including Baidu and BYD, to a list of companies tied to China’s military, a designation that could restrict their ability to win US defense-related contracts. China’s Commerce Ministry responded by expressing strong opposition, accusing Washington of disregarding the consensus reached at a recent Beijing summit, and warning it would “resolutely and forcefully retaliate” if the measures weren’t withdrawn.
Underneath the tariff headlines sits a quieter, arguably more important fight: rare earth minerals. In October 2025, China introduced its most sweeping restrictions yet: any foreign-made product containing 0.1 percent or more of Chinese-origin rare earths, or made using Chinese processing technology, now requires a license to be exported anywhere in the world. That rule was paused as part of the truce process, but the suspension only applies to the October restrictions. China’s earlier April 2025 controls on rare earth exports were never lifted and remain fully in effect.
Why did this happen?
This conflict didn’t start in 2026. US tariffs on China climbed from near-zero in 2018 to around 20 percent by 2021, and neither the Biden nor the Trump administration rolled them back. When Trump returned to office in January 2025, he escalated dramatically and quickly. By April 2025, he had raised tariffs on China by 145 percentage points, and by June, US imports from China had fallen by roughly half levels not seen since the 2009 financial crisis.
China didn’t simply absorb the pressure. Xi restricted Chinese exports in response, and twice in 2025 nearly brought the US auto industry to a standstill by cutting off access to essential Chinese-made components, a serious risk given that nearly 6.5 percent of US manufacturing workers are employed in just-in-time automotive supply chains that depend on those parts arriving on schedule.
The rare earth piece of this story is just as critical. China controls roughly 94 percent of global permanent magnet production, and despite years of US tariffs and financial incentives aimed at diversifying supply, alternative sources still haven’t materialized at a meaningful scale. The legal foundation for many of Trump’s 2025 tariffs eventually collapsed too in February 2026, the Supreme Court ruled that the president could not use emergency powers to impose tariffs the way his administration had, forcing the White House to find new legal tools to keep up the pressure on Beijing.
Who is affected and how?
This fight reaches well past Washington and Beijing boardrooms and straight into household budgets. Tax Foundation estimates put the cost of the 2026 tariffs at roughly $700 per US household per year, with no meaningful reduction in the actual trade deficit the tariffs were supposed to fix.
Manufacturers dependent on rare earths are feeling the squeeze most acutely. CSIS research published in May 2026 found that US yttrium imports critical for aerospace turbine coatings collapsed from over 333 metric tons in the eight months before China’s April 2025 restrictions to just 17 metric tons in the eight months after, leading some aerospace manufacturers to ration the material. The pain isn’t confined to the US either. European Central Bank economists estimate that more than 80 percent of large European firms sit no more than three suppliers away from a Chinese rare earth producer, and the International Energy Agency has reported rare earth prices in the EU running up to six times higher since the restrictions began.
US efforts to build alternative supply chains are underway but moving slowly. The Department of Defense has committed $400 million to MP Materials, currently the only integrated mine-to-magnet producer in the US, which also signed a $500 million long-term supply deal with Apple, but the company is still unprofitable and only beginning to scale up magnet manufacturing. Even with that investment, McKinsey, CRU Group, and Benchmark Mineral Intelligence all project that non-China supply will still meet less than one-fifth of global demand for dysprosium and terbium, two of the most critical and restricted elements, by as late as 2035.
As part of the broader reset between the two countries, there are some constructive steps too. The two sides have agreed to create a board of trade to manage non-sensitive goods, reduce tariffs in select agricultural and industrial sectors, and have China commit to purchasing US aircraft while addressing American concerns over critical mineral access. Whether that translates into lasting stability or just buys time remains to be seen.
What happens next?
There are three realistic paths from here, and none of them resolve the conflict outright.
Managed coexistence. Both leaders have spoken about building “a constructive relationship of strategic stability,” signaling an effort to keep tensions predictable even without fully resolving the underlying disputes. This is the path both governments are publicly betting on for now.
Renewed escalation. The US Trade Representative has already proposed a new 12.5 percent tariff tied to a forced-labor investigation, and similar investigations covering dozens of economies, including China, are expected to conclude this summer, right around when the current 60-day truce window closes. Trade lawyers are advising companies to expect regulatory tightening in late 2026 if bilateral relations sour or if China reinstates the suspended October restrictions.
A long, slow decoupling regardless of diplomacy. Trump appears set to prioritize lowering tariffs on allied countries specifically to encourage them to keep their supply chains out of China, rather than easing pressure on Beijing directly. The rare earth suspension itself has a hard deadline: it expires on November 10, 2026, just six months from now, and if it lapses, the extraterritorial licensing rules requiring permission to export any product containing even trace amounts of Chinese rare earths will snap back into force worldwide.
Key takeaway
- The US and China are in a temporary 60-day truce, not a resolved conflict. Average tariffs remain near 47.5 percent on Chinese goods and 31.9 percent on US goods.
- Rare earth restrictions are the quieter half of this story: China’s April 2025 controls never lifted, and a second wave of restrictions returns automatically on November 10, 202,6 unless renewed diplomacy extends the pause
- US households are already paying an estimated $700 more per year because of these tariffs, while efforts to build non-Chinese rare earth supply chains remain years away from meeting even a fifth of global demand