In a dramatic escalation of the economic standoff between China and the United States, Beijing has moved to intensify its control over rare earth minerals and magnet technologies — a strategic gambit to block trade and open a new front in the trade war.
U.S. industries and policymakers are scrambling to respond to what some analysts warn is Beijing's increasing ability to weaponize its near-monopoly over critical minerals.
Since at least April 2025, China has imposed strict export licensing requirements on seven rare earth elements and magnet materials—among them samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium — citing "national security" and dual-use concerns.
Chinese manufacturers and countries that use Chinese materials in their own manufacturing are being told not to trade with the U.S. if they want continued access of these strategic minerals.
In October, Beijing extended those restrictions further, adding five more elements (holmium, erbium, thulium, europium, ytterbium) and broader controls on processing technologies, magnet manufacturing equipment, and recycling systems.
China, which accounts for over 90% of global rare earth refining capacity and roughly 70% of the world's mine output, now holds tight control not just over raw ores but the midstream and downstream steps critical for industries.
By placing key rare earth magnets on its export control list, China has forced foreign manufacturers — even in allied countries — to apply for Beijing's licensing to receive critical components.
According to analysts, these measures represent a more refined strategy than blanket tariffs: rather than targeting a broad swath of goods, China is carving out choke points in high-value sectors such as electric vehicles, semiconductors, aerospace, and defense.
Already, some European automakers have announced temporary shutdowns at supplier plants unable to obtain magnet parts.
In internal Chinese bureaucratic terms, a tiny licensing office within the Commerce Ministry now wields disproportionate influence: that office reviews export permit applications for rare earth magnets and separates critical applications for defense or semiconductors on a case-by-case basis.
Observers call this a "scalpel diplomacy" approach — allowing China to tighten or loosen flows strategically depending on negotiations.
China's position stems not simply from geology but from decades of industrial policy and consolidation.
While China might not hold a majority of all rare earth reserves globally, it dominates the full value chain — mining, refining, alloying, magnet manufacture, and recycling.
Because many advanced technologies require rare earth magnets with very precise tolerances (for electric motors, wind turbines, lasers, radar, guidance systems), competitors cannot easily substitute or shift supply at scale.
This means that industries in the U.S., Europe, Japan, and elsewhere are vulnerable not only to raw ore shortages but delays or denials at the processing and magnet-component levels.
China has reportedly required end-user guarantees from countries like India ensuring that exported magnets won’t be re-exported to the U.S.
These structural dependencies give Beijing what economists call "supplier power" in strategic supply chains — especially for technologies tied to climate transition, defense systems, telecommunications, and energy.
President Donald Trump, accusing China of using rare earths as a "very hostile" weapon, has responded forcefully.
In early October, he threatened to impose a 100% tariff on Chinese imports beginning Nov. 1, citing Chinese export controls on rare earths and restrictions on technology trade.
He also floated the imposition of U.S. export controls on American software and advanced technologies destined for China.
Markets reacted sharply: the S&P 500 dropped roughly 2.7%, weighed by fears of renewed trade escalation.
Trump framed China's rare earth controls as a direct threat to U.S. national security and promised retaliatory measures should Beijing refuse to yield.
In public statements, Trump has characterized U.S. industries as being held "captive" by China's mineral monopoly.
Behind the scenes, the U.S. Department of Defense has begun accelerated stockpiling of critical minerals, budgeting billions for procurement and domestic alternatives.
On diplomacy, the Trump administration asserts willingness to de-escalate via trade talks — but only if China rolls back its rare earth restrictions.
Trump has not canceled a scheduled meeting with President Xi Jinping at an upcoming Asia summit, but the tone has hardened, and the risk of breakdown looms.
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