Behind US–China Trade Truce – Agriculture, Rare Earths, and Global Power Plays
GK & Current Affairs for CLAT | CLAT Current Affairs 2026
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Introduction
The United States–China trade relationship is among the most important and contentious economic interactions in the world. Both countries are deeply interconnected yet engaged in fierce competition for global dominance. The two nations together account for more than one-third of the world’s GDP, making any economic standoff between them highly consequential for global markets.
The “trade war” between the US and China began under former US President Donald Trump in 2018, when Washington imposed heavy tariffs on Chinese imports, accusing Beijing of unfair trade practices, currency manipulation, and intellectual property theft. China retaliated with tariffs of its own, creating global instability in supply chains.
However, even amid these disputes, certain sectors became critical bargaining chips — most notably, rare earth elements controlled by China and agricultural commodities exported by the US to China. The recent extension of the US–China trade truce, announced in August 2025, highlights how both sides are carefully managing tensions to protect their economic interests.
For students preparing for CLAT Current Affairs 2026, this issue is significant because it blends international trade law, economic diplomacy, intellectual property rights, and the geopolitics of resources. At CLAT Gurukul, the best online coaching for CLAT, we emphasize such developments, as they provide real-world applications of law, governance, and economics — themes regularly tested in law entrance exams.
Why in News?
- Donald Trump extended the US–China trade truce until November 2025, postponing the imposition of additional 145% tariffs on Chinese goods.
- This move comes after Beijing leveraged its power as a major importer of US agricultural commodities (especially soybean and corn) to pressure Washington into negotiations.
- China has also signaled its ability to retaliate by restricting exports of rare earth minerals, crucial for aerospace, defense, and semiconductor industries.
- US farmers, especially soybean growers, heavily depend on Chinese demand. Any disruption in this trade relationship directly affects American states like Iowa, Illinois, and Minnesota, making it a politically sensitive issue in an election year.
- The contrast with India is striking: while US exports to China fell 51% in the first half of 2025, India’s agricultural exports to China grew 413% in the same period.
Point-wise Summary of the Article
- Trump’s Extension of Trade Truce
- The US had earlier imposed a 125% tariff on Chinese goods, later reduced to 10%.
- Trump’s extension delays a planned 145% tariff hike until November 10, 2025.
- This truce allows further negotiations between the two countries.
- China’s Bargaining Power
- China has vast control over rare earth minerals, which are critical for electronics, defense, and renewable energy.
- It also uses its status as the world’s largest importer of agricultural products to apply pressure on the US.
- By selectively increasing or cutting imports of US farm goods, China can sway American political sentiment, especially in farm-dependent states.
- Importance of Agricultural Trade
- China is the world’s largest buyer of soybeans, corn, cotton, pork, and poultry.
- In 2024, China imported:
- 74.7 million tons of soybeans, mostly from Brazil, but also significant amounts from the US.
- Huge quantities of corn and poultry meat from the US.
- US exports of agricultural goods to China fell sharply in 2025, from $27.04 billion in Jan–June 2024 to just $13.87 billion in Jan–June 2025.
- Impact on US Farmers
- American farmers in Midwestern states are heavily reliant on Chinese demand.
- Decline in exports hurts US states like Ohio, Iowa, Minnesota, and Illinois.
- Farm lobby pressure is one of the main reasons Trump extended the truce.
- Rare Earth Leverage
- China is the world’s dominant supplier of rare earth metals and magnets, critical for:
- Aerospace.
- Semiconductor manufacturing.
- Defense and automotive industries.
- By threatening to restrict exports, China gains bargaining power over the US.
- Contrast with India
- While US exports to China plunged, India’s exports surged by 413% in Jan–June 2025.
- India exported $1.81 billion worth of agricultural goods to China in this period, compared to $351 million the previous year.
- India’s soymeal, rice, fruits, and marine products are finding greater markets in China.
- Global Trade Implications
- The US–China truce shows how trade disputes are influenced by both economic interests and political calculations.
- It highlights the interconnectedness of global supply chains, especially in food and strategic minerals.
Peculiar Terms Explained
- Trade Truce – A temporary halt to trade hostilities (like tariff hikes), allowing negotiations.
- Tariff – A tax imposed on imported goods, making them more expensive and less competitive.
- Rare Earth Elements – A group of 17 minerals critical for electronics, renewable energy, and defense technologies.
- Agri-commodities – Agricultural products traded globally, such as soybean, corn, rice, cotton, and meat.
- Bargaining Chip – An asset or tool used by one country to pressure another in negotiations.
- Trade War – A situation where countries impose tariffs and restrictions on each other’s goods to gain advantage.
- Soybean Complex – Refers to soybean and its processed derivatives, including oil and animal feed.
Legal and Economic Implications
- International Trade Law
- WTO (World Trade Organization) rules prohibit arbitrary tariff increases but allow anti-dumping duties and safeguard measures.
- US–China disputes often test the limits of WTO enforcement.
- Intellectual Property Rights (IPR)
- One of the original triggers of the trade war was US accusations that China was stealing American IPR and technology secrets.
- Trade truces often involve side negotiations on IPR protections.
- Impact on India
- India benefits from the trade war as China diversifies suppliers.
- Indian farmers and exporters gain new access to Chinese markets.
- However, India must navigate carefully to avoid angering either Washington or Beijing.
- Domestic Political Impact (US)
- Farm states play a key role in US elections.
- China’s manipulation of agricultural imports directly influences US domestic politics.
- Strategic Security Issues
- Rare earth supply chains raise national security concerns for the US.
- This has led Washington to explore alternative sources (Australia, Africa, and even India).
Conclusion
The US–China trade truce illustrates how economics and politics are deeply intertwined in global diplomacy. By leveraging its control over rare earths and its status as the largest importer of agricultural goods, China has successfully pressured the US to pause tariff hikes. At the same time, the US farm lobby has pushed Washington to maintain Chinese market access, showing how domestic politics intersects with international trade.
For India, this episode presents both opportunities and challenges. While American exports to China have declined, India’s exports have surged, giving Indian producers an edge in global markets. However, India must tread carefully in balancing its relationships with both superpowers.
For CLAT Current Affairs 2026, this case is highly relevant because it ties together international trade law, WTO rules, agricultural economics, strategic minerals, and foreign policy. At CLAT Gurukul, the best online coaching for CLAT, we help aspirants decode such complex issues, ensuring they understand not just the facts but also the legal, economic, and political implications. Through our online coaching for CLAT, students get a competitive edge in tackling high-level GK and current affairs questions.
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