China Tightens Rare Earth Export Rules, Escalating Trade Tensions with the United States
China has reignited trade tensions with the United States after announcing sweeping new restrictions on the export of rare earth elements — a move that could have major implications for global supply chains and high-tech industries.
Last week, the Chinese Ministry of Commerce released “Announcement No. 62 of 2025,” a document that has shaken the fragile tariff truce between Beijing and Washington. The new rules impose strict limits on the export of rare earths — a group of minerals critical for producing smartphones, electric vehicles, wind turbines, and advanced military equipment.
The decision highlights China’s powerful leverage in the global trade arena and underscores how deeply the world depends on its dominance in rare earth processing.
China’s Tight Grip on Rare Earths
China currently controls nearly 90% of the world’s rare earth refining capacity, giving it a near-monopoly on materials vital for modern technology. Under the new regulations, foreign companies must now seek government approval to export any products containing rare earths — even in trace amounts — and must disclose the intended use of those materials.
The move signals Beijing’s intention to use its control of these critical minerals as a strategic tool in its trade standoff with the United States.
In response, U.S. President Donald Trump threatened to impose a 100% tariff on Chinese goods and introduce new export controls on advanced U.S. software.
“This is China versus the world,” said U.S. Treasury Secretary Scott Bessent. “They’ve aimed a bazooka at the supply chains and industrial base of the free world — and we’re not going to have it.”
Beijing Pushes Back
China has rejected Washington’s accusations, saying the U.S. has “deliberately provoked unnecessary misunderstanding and panic.”
A spokesperson for the Chinese Ministry of Commerce clarified that export licenses would still be approved for companies whose applications are compliant and whose materials are for civilian use.
Despite these assurances, the announcement has already rattled global markets, driving up concerns over supply disruptions and potential price spikes for key minerals.
The move also comes as both nations exchange new port fees on each other’s shipping operations, ending months of relative calm following a temporary trade truce brokered in May.
Rare Earths: The Backbone of Modern Technology
Rare earth minerals are essential components in the production of electric vehicles, renewable energy systems, and advanced defense technologies.
For example, each F-35 fighter jet requires roughly 400 kilograms (880 pounds) of rare earths for its radar systems, stealth coatings, and electronic components.
“China’s new restrictions will shock the system,” said Dr. Naoise McDonagh, a lecturer in international business at Edith Cowan University in Australia. “They’re targeting the weakest points in America’s supply chains — and the timing couldn’t be worse for Washington.”
China’s Long-Term Dominance
Experts say China’s dominance in the rare earth market is the result of decades of investment in mining, processing, and research.
According to Dr. Marina Zhang from the University of Technology Sydney, China has built an unmatched network of specialized talent and infrastructure, leaving other countries years behind.
While nations like the United States, Australia, and Canada are now racing to develop alternative sources, the gap remains enormous.
“Australia, for instance, has significant deposits,” Zhang said, “but the country still lacks the large-scale processing capacity needed to compete with China. Even with full government backing, it would take at least five years for Western nations to catch up.”
Economic and Strategic Implications
Despite the dramatic headlines, the rare earth sector contributes only a tiny fraction to China’s $18.7 trillion economy — less than 0.1% of GDP, according to Prof. Sophia Kalantzakos of New York University.
However, its strategic value far outweighs its economic footprint. “Rare earths give China enormous leverage in global trade negotiations,” Kalantzakos said. “While their economic value is small, their geopolitical value is huge.”
The latest figures show that China’s rare earth exports dropped by more than 30% in September compared to last year. Yet analysts believe Beijing is willing to absorb short-term losses to achieve long-term strategic goals.
The U.S. Response and Diplomatic Maneuvering
Despite strong rhetoric, Washington appears open to negotiation. Treasury Secretary Bessent said he was “optimistic” that both sides could de-escalate tensions through dialogue.
China’s Foreign Minister Wang Yi echoed this sentiment during a meeting with Blackstone CEO Stephen Schwarzman, emphasizing that both countries should “engage in effective communication, properly resolve differences, and promote stable, healthy, and sustainable relations.”
Kalantzakos believes the timing of China’s announcement was deliberate — a calculated move to strengthen its position before upcoming trade talks between President Xi Jinping and President Trump later this month.
“China is getting its ducks in a row,” she said. “By controlling rare earth exports, Beijing is using its most immediate lever to pressure Washington into a more favorable deal.”
The U.S. Still Holds Some Cards
While China has the upper hand in the short term, analysts say Washington still has strategic options.
According to Prof. Jiao Yang of Singapore Management University, the U.S. could offer to reduce existing tariffs, which would appeal to Beijing, as the trade war has already weakened its manufacturing sector.
China’s exports to the U.S. are reportedly down by 27% compared to last year — a serious blow to its export-driven economy.
Meanwhile, the U.S. can continue targeting China’s tech sector, as it has done by restricting access to high-end semiconductors from American companies like Nvidia.
However, McDonagh cautions that such restrictions are unlikely to cripple China.
“These measures may slow Beijing down,” he said, “but they won’t stop it. China has shown time and again that it’s willing to take short-term pain for long-term gain. If the U.S. restricts chip exports, China will adapt. But if China cuts off rare earth supplies — that could stop entire industries in their tracks.”
A High-Stakes Game of Leverage
As tensions escalate, the global economy watches closely. Rare earths may represent a small sector economically, but they have become one of the most powerful bargaining chips in the ongoing trade war.
For Beijing, the message is clear: in a world increasingly dependent on advanced technology, control of critical minerals equals geopolitical power.
And for Washington, the challenge now lies in finding ways to secure that power — without further destabilizing the fragile global supply chain.