Highlights

• U.S. allies are cautiously reopening trade channels with China due to tariff threats and diplomatic unpredictability under Trump, seeking optionality over allegiance.
• China's control over rare earth processing, magnet production, and critical mineral supply chains gives Beijing structural leverage over EVs, defense, and electronics manufacturing.
• This represents transactional détente in the Great Powers Era 2.0, where allies tolerate China exposure to navigate supply-chain bottlenecks Washington hasn't resolved.

---

Wall Street Journal yesterday reported (opens in a new tab) that U.S. allies—stung by tariff threats and diplomatic volatility under President Donald Trump—are cautiously reopening channels with China. Canada trims EV tariffs. Britain restarts trade talks. Europe toys with price floors over punitive duties. On the surface, this is a trade diversification story. Underneath, it is a supply-chain anxiety story—one where rare earths quietly matter.

On the Money

The article accurately captures the hedging behavior of middle powers. Faced with an unpredictable Washington, allies are seeking optionality, not allegiance. China’s economic gravity—despite geopolitical risk—makes it unavoidable. The piece also correctly notes Beijing’s willingness to use trade as leverage, including last year’s rare earth export restrictions. That detail is not incidental; it is the sharpest reminder that trade realignment collides with material reality.

Where the Story Skims the Surface

What goes underplayed is why China retains leverage even as trust erodes. It isn’t just market size—it’s control over critical inputs. Rare earth separation, magnet production, and processing depth give China a veto-like influence over EVs, wind turbines, defense systems, and electronics. Allies flirting with Beijing are not chasing cheap goods alone; they are navigating bottlenecks Washington has yet to resolve.

The article frames rare earths as one pressure tool among many. In practice, they are the pressure point—low-visibility, high-impact, and hard to substitute quickly.

The Investor Reality Check

This is not a return to pre-2012 globalization. It is a transactional détente shaped by fear of being squeezed between two giants. Part of the emergence of the Great Powers Era 2.0. 

For investors, the implication is blunt: expect more hedging, more bilateral deals, and more tolerance for China exposure—until rare earth chokepoints tighten again. When they do, trade diplomacy will snap back to industrial reality.

Bottom Line

China doesn’t need allies to admire it—it only needs them to depend on it. As long as rare earth midstream capacity, critical-mineral chokepoints, and a disproportionate share of global manufacturing remain concentrated inside China, Beijing’s leverage is structural and enduring—no matter how often Western capitals invoke the language of “de-risking.” Rare Earth Exchanges™ has repeatedly cautioned that China is moving to control the innovation downstream.

Citation: Wall Street Journal, Jan. 26–27, 2026