In a major escalation of trade tensions, China has imposed sweeping new export controls on rare earth minerals, prompting sharp criticism from U.S. officials who accuse Beijing of a ‘global supply-chain power grab.’ The move comes just weeks before an expected meeting between Presidents Trump and Xi, threatening to derail fragile truce efforts.
Last week, China’s Ministry of Commerce announced stringent new regulations requiring foreign companies to obtain government approval for exports containing rare earths, citing national security concerns. The decision has ignited a fresh wave of accusations between Washington and Beijing, with U.S. Trade Representative Jamieson Greer labeling it an attempt to control global technology supply chains. This expansion of measures first introduced in April aims to tighten Beijing’s grip on the critical minerals, which are essential for everything from smartphones to military hardware.
The restrictions mandate that exporters declare the intended use of rare earth-containing products, with approvals granted only for civilian applications. China processes over 70% of the world’s rare earths, giving it significant leverage in international trade. Rare earth elements are vital components in modern technology, including electric vehicles, wind turbines, and advanced weaponry like the F-35 fighter jet, which requires over 400 kilograms per aircraft. Their strategic importance cannot be overstated, as alternatives remain underdeveloped and costly.
In response, President Trump has threatened to impose 100% tariffs on Chinese goods if Beijing does not reverse course, while Treasury Secretary Scott Bessent accused China of market manipulation. Bessent indicated the administration might take equity stakes in domestic companies to secure supply chains, emphasizing the need for self-sufficiency. ‘This is China versus the world,’ he stated, highlighting the global stakes. The U.S. and its allies have been racing to build independent supply chains, but experts estimate it could take years to match China’s processing capabilities.
China, however, has pushed back against what it calls ‘panic’ from the U.S., with Commerce Ministry spokesperson He Yongqian asserting that compliant applications will be approved. Beijing argues that its measures are proportionate to U.S. actions, such as semiconductor restrictions, and has expressed openness to negotiations. ‘The two sides should engage in effective communication,’ Foreign Minister Wang Yi reiterated during a meeting with U.S. business leaders, underscoring a willingness to de-escalate tensions.
The flare-up ends months of relative calm following a May truce and occurs ahead of a planned Trump-Xi summit in South Korea. Analysts suggest China’s timing is strategic, aimed at strengthening its bargaining position. ‘The timing has really upset the kind of timeline for negotiations that the Americans wanted,’ noted Naoise McDonagh, an international business lecturer. This confrontation underscores the fragility of U.S.-China relations, with rare earths serving as a key lever in broader geopolitical rivalries.
Despite the tensions, both sides have left room for dialogue. Bessent expressed optimism that the issue could be resolved through talks, while China has signaled willingness to discuss differences. However, the economic impact on China is minimal—rare earths account for less than 0.1% of its GDP—but their strategic value in trade negotiations is immense. Experts warn that while the U.S. can retaliate with further tariffs or tech restrictions, China’s control over rare earths gives it a unique ability to disrupt global industries.
Looking ahead, the outcome of the upcoming leaders’ meeting could determine whether the trade war escalates or a new agreement is forged. The world watches closely, as the dispute over rare earths highlights deeper issues of supply chain security and economic interdependence. With both nations weighing further measures, the resolution of this conflict will have lasting implications for global trade and technological advancement.