Trump and Xi Buy Two More Months

Donald Trump hung out with Xi Jinping last week.

It was the Chinese leader’s first US visit in 11 years.

The big takeaway was a two-month extension of the US-China trade truce.

The truce had been due to expire on 10 November and now runs to 10 January.

China says the extra time lets both sides check how the current arrangement is working.

And truces between these two tend to crack.

Trump and Xi agreed on a 90-day ceasefire in Buenos Aires in late 2018.

It fell apart in May 2019, when Trump lifted tariffs on US$200 billion of Chinese goods to 25%.

Then there’s the truce the two sides struck in Geneva in May 2025.

By October, Beijing had widened its rare earth export controls and Trump had threatened an extra 100% tariff.

Before last week’s summit, US officials told the Financial Times China had delivered only about two-thirds of its rare earth commitments.

So I wouldn’t imagine this truce will last particularly long.

This is the real story

Here’s the thing, though.

Everyone keeps staring at the supply side of rare earths, and at who controls the flow out of China.

It’s made for a bumpy ride.

The Australian Financial Review reports Gina Rinehart’s Hancock Prospecting is nursing around $680 million in paper losses on rare earth stocks over the past year.

Hancock says it invests with a long-term view.

I reckon that’s the right idea, because the real story sits on the demand side.

Rare earth magnets power the motors in electric vehicles and wind turbines.

And magnet market specialist Adamas Intelligence expects robotics to become the biggest user of these magnets by around 2040.

It could be sooner.

Tesla is targeting long-term capacity of one million Optimus robots a year at its Fremont, California factory.

And even more robots from a new facility in Texas.

So that demand won’t wait for Trump and Xi to settle their differences.

An unlikely tailwind from Canberra

Closer to home, the budget could help as well.

Back in May, I channelled Seinfeld’s George Costanza and braced for a budget hostile to investors.

That has largely played out.

But the worst may be over.

Big dog UBS strategist Richard Schellbach reckons the changes could push money out of investment property and toward shares.

His research shows investor attention shifted toward shares and funds when New Zealand and South Korea cooled property investment.

Super looks like the obvious channel here.

Charter Hall boss David Harrison puts Australians’ residential investment property holdings at $3.6 trillion.

If 10% of that moved into super and a quarter landed in local shares, it adds up to roughly $90 billion of potential buying.

That’s about the size of Fortescue and Telstra put together.

Super funds tend to buy big caps first, but in my experience, fresh money eventually trickles down to smaller companies.

A long-run demand story plus a new stream of domestic money is a potent mix.

It could make for better small-cap conditions than we’ve seen over the past six months.

And if that truce breaks down again, you’ll definitely want to hear this before that happens…

I’ve picked out four ASX rare earth companies that I think could benefit most from this setup.

I discuss all four in my new presentation: Elon’s Final Moonshot (Free).