The Busan trade deal was supposed to end the economic cold war. Now it may become the opening salvo of a new one.
Washington has warned Beijing that it must "immediately" fulfill its pledges to boost exports of rare earths and other critical materials, according to U.S. officials, marking the first serious enforcement confrontation since the accord was signed in South Korea earlier this year. The message is blunt: comply or face consequences that neither side has yet specified but both understand.
The timing is pointed. With Democrats having swept the midterms on a platform that included skepticism of unfettered globalization and tech-sector excess, the Biden administration faces pressure to demonstrate that its signature trade achievement actually delivers. Rare earths—the unglamorous elements essential for everything from electric vehicles to missile guidance systems—were the deal's centerpiece concession from China. Without them, the accord is just paper.
The Supply Chain Chokepoint
China controls roughly 60 percent of global rare earth mining and an even larger share of processing capacity. The Busan agreement was meant to ease that stranglehold gradually, with Beijing committing to increase export quotas and reduce processing bottlenecks that have kept Western manufacturers dependent on Chinese intermediaries. According to Washington's complaint, those increases have not materialized.
The accusation carries weight because it is verifiable. Export data, shipping manifests, and commodity pricing all tell a consistent story: rare earth supplies to American and allied manufacturers remain constrained, even as Chinese domestic industries enjoy preferential access. Whether this reflects deliberate foot-dragging or bureaucratic inertia in Beijing is almost beside the point. The result is the same.
Why Beijing May Be Stalling
From China's perspective, the calculus has shifted. The midterm results weakened the political coalition that negotiated Busan—tech executives who championed the deal have seen their influence crater alongside their stock prices and their preferred candidates. Beijing may be betting that a chastened Washington will be too distracted by domestic recriminations to enforce compliance aggressively.
There is also the matter of leverage. Rare earths are one of the few areas where China holds genuine structural advantage over the United States. Surrendering that advantage for promises of market access that may never fully materialize looks less attractive now than it did when the deal was signed. The question is whether Beijing miscalculates how far Washington is willing to escalate.
Our Take
The Busan accord was always more ceasefire than peace treaty—a pause in hostilities dressed up as resolution. What happens next will reveal whether either side ever intended to honor its terms or simply needed a face-saving interval before the next round of confrontation. The smart money says this ends with tariffs, not rare earths. But for a global economy that desperately needed the deal to work, even the uncertainty is costly.
