Imagine a world where your smartphone, your electric car, even the most advanced military technology suddenly become much harder to produce. That's the potential reality China is wielding right now. The latest move in the ongoing trade war has seen China tightening its grip on the global supply of rare earth minerals, essentially putting a squeeze on industries worldwide and directly targeting a key vulnerability of the US.
Two hours ago, Reuters reported on this escalating situation, highlighting how a seemingly innocuous document, "Announcement No. 62 of 2025" from China's Ministry of Commerce, has sent shockwaves through the already fragile US-China trade relationship. This announcement isn't just bureaucratic red tape; it's a strategic play that could drastically reshape the global balance of power.
China's near-monopoly on rare earth processing gives it immense leverage. These minerals are essential for manufacturing a vast array of products, from everyday consumer electronics like smartphones to cutting-edge military hardware like fighter jets. Under the new rules, any foreign company now needs explicit approval from the Chinese government to export products containing even a trace amount of rare earths and, furthermore, must declare precisely how those materials will be used. This level of control is unprecedented.
In response, former US President Donald Trump didn't hold back, threatening to slap a 100% tariff on Chinese goods and impose export controls on key software. "This is China versus the world," declared US Treasury Secretary Scott Bessent, accusing China of aiming a "bazooka" at global supply chains. But here's where it gets controversial... Is this a legitimate defense of national interests, or is it economic coercion on a grand scale?
A Chinese Commerce Ministry spokesperson countered that the US had introduced 20 measures to suppress China shortly after economic and trade talks. Adding fuel to the fire, both countries have also imposed new port fees on each other's ships, signaling a return to heightened trade tensions.
These developments mark the end of a period of relative calm following a truce brokered in May, and experts predict that China's rare earth restrictions will give them a significant advantage when the leaders of both countries meet later this month. Naoise McDonagh, an international business lecturer from Edith Cowan University, notes that the timing has "really upset the kind of timeline for negotiations that the Americans wanted," targeting vulnerabilities in American supply chains.
To illustrate the importance of these minerals, consider the F-35 fighter jet. It's estimated that each jet requires over 400kg (881.8lb) of rare earths for its stealth coatings, motors, radars, and other critical components. Furthermore, China controls approximately 70% of the global supply of metals used in magnets for electric vehicle motors, according to Natasha Jha Bhaskar from Newland Global Group. And this is the part most people miss... It's not just about the raw materials; it's about the processing capability that China has painstakingly developed over years.
Marina Zhang, a critical minerals researcher from the University of Technology Sydney, explains that China has cultivated a vast talent pool and built a research and development network that is years ahead of its competitors. While the US and other countries are investing heavily in developing alternative sources, they are still far from catching up. Australia, with its own large rare earth deposits, could potentially challenge China, but its processing infrastructure remains underdeveloped, making it a costly alternative. Zhang estimates that even with a concerted national effort, it would take the US and its allies at least five years to match China's capabilities.
The current restrictions expand on measures announced in April, which caused a global supply crunch before being eased by deals with Europe and the US. Recent figures show a 30% year-on-year decrease in China's rare earth exports in September. However, analysts believe that China's economy is unlikely to suffer significantly from this drop.
Professor Sophia Kalantzakos from New York University points out that rare earths constitute a tiny fraction (less than 0.1%) of China's massive $18.7 trillion economy. While the economic value may be small, their strategic value is "huge," giving Beijing leverage in negotiations with the US.
Despite accusing China of "betrayal," Secretary Bessent has kept the door open for negotiations. Professor Kalantzakos believes that China is simply preparing for these trade talks, using the rare earth restrictions as its "best immediate lever" to pressure Washington for a favorable deal, according to Bhaskar.
Jiao Yang from Singapore Management University suggests that the US has strategic options, such as lowering tariffs to appeal to Beijing, whose manufacturers have been hit hard by the trade war. China's exports to the US are already down by 27% year-on-year. Washington could also threaten further trade restrictions to hinder China's technology sector, as seen with the blocking of Nvidia's advanced chip sales. However, experts like Professor McDonagh believe these measures will only have limited effects, slowing China down but not stopping it entirely. China, he argues, is willing to endure economic pain to achieve its long-term goals.
"China can carry on even if it costs a lot more under US export controls," McDonagh concludes. "But if China cuts off these rare earth supplies, that can actually stop everyone's industry. That's the big difference." This raises a crucial question: Will the US and its allies be able to break free from their dependence on China for these vital resources, or will they remain vulnerable to Beijing's strategic maneuvering? What do you think the long-term impact of China's rare earth strategy will be on the global economy and technological landscape? And, more importantly, is this a legitimate use of economic power, or a form of unfair coercion that demands a stronger international response?
