China’s Rare Earth Restrictions Aim to Beat U.S. at Its Own Game

 

“Beijing’s latest effort to weaponize global supply chains is modeled on the American technology controls that it has long criticized.

 

Over the past three years, Washington has claimed broad power to impose global rules that bar companies anywhere in the world from sending cutting-edge computer chips or the tools needed to make them to China. American officials have argued that approach is necessary to make sure China does not gain the upper hand in the race for advanced artificial intelligence.

 

But a sweeping set of restrictions announced by Beijing last week showed that two can play that game.

 

The Chinese government flexed its own influence over worldwide supply chains when it announced new rules clamping down on the flow of critical minerals that are used in everything from computer chips to cars to missiles. The rules, which are set to take effect later this year, shocked foreign governments and businesses, which may now need to acquire licenses from Beijing to trade their products even outside China.

 

With its dominance over the production of these rare earth minerals and its control of other strategic industries, China may have an even greater ability than the United States to weaponize supply chains, analysts say.

 

“The U.S. now has to face up to the fact it has an adversary which can threaten substantial parts of the U.S. economy,” said Henry Farrell, a political scientist at the Johns Hopkins School of Advanced International Studies. The United States and China are now very clearly “in a much more delicate stage of mutual interdependence,” he added.

 

“China has really begun to figure out how to take a leaf from the U.S. playbook and in a certain sense play that game better than the U.S. is currently playing it,” Mr. Farrell said.

 

China’s move has rekindled tensions between the world’s two largest economies, with President Trump threatening to increase already substantial tariffs on Chinese imports by imposing an additional 100 percent tax on Nov. 1 unless Beijing backs down from its new restrictions.

 

The type of supply chain restriction that China is embarking on first came into play in 2020. Washington dusted off an obscure provision known as the foreign direct product rule to target the Chinese tech giant Huawei, which the U.S. government considered a national security threat. But instead of restricting American technology exports just to Huawei, the United States said any company anywhere in the world could not ship a product to Huawei if it contained U.S. parts or was made with U.S. equipment or software.

 

Because of the United States’ key role in the global chipmaking industry, the rules basically encompassed all advanced technology. It was a broad exertion of U.S. economic power that became the basis of a series of global tech rules during the Biden administration. Although foreign governments chafed at being told what to do, many cooperated for fear of being cut off from U.S. technology.

 

The question now is: Will the Chinese restrictions persuade the Trump administration to walk back its tariffs or longstanding technology restrictions, or will China’s government fold under pressure first?

 

The administration seemed caught off guard by China’s restrictions, which could cripple American industries.

 

Mr. Trump threatened on Friday to cancel a planned meeting with the Chinese leader, Xi Jinping, as well as adding a 100 percent tariff. After stock markets plunged, the president posted on social media on Sunday, “Don’t worry about China, it will all be fine!”

 

On Tuesday, Mr. Trump renewed his barbs, telling a crowd of reporters and the president of Argentina that Mr. Xi “gets testy because China likes to take advantage of people and they can’t take advantage of us.” That afternoon, Mr. Trump wrote on social media that the United States was considering terminating cooking oil imports from China, as well as potentially other business.

 

On Wednesday morning, Treasury Secretary Scott Bessent and Jamieson Greer, the U.S. trade representative, described the Chinese licensing system as a global power grab and said the United States stood ready to impose its tariffs if China moved forward.

 

“Our expectation is that this never goes into effect,” Mr. Greer said.

 

Chinese officials have long criticized America's extraterritorial enforcement of economic measures and insisted that Beijing has acted with consistency in the face of renewed threats from Washington.

 

“The United States talks about engagement on one hand while resorting to threats and intimidation on the other, imposing steep tariffs and introducing new restrictive measures,” Lin Jian, a spokesman for the Chinese Ministry of Foreign Affairs, said on Wednesday. “This is not the right way to engage with China.”

 

Jiang Tianjiao, an associate professor at Fudan University, said that Chinese officials had noted recent efforts by the United States to restart its own rare earth industry and that they wanted to demonstrate their leverage before a possible meeting between Mr. Trump and Mr. Xi.

 

U.S. officials and analysts said the impacts of the Chinese licensing system would be much broader than U.S. technology controls, which have targeted only more advanced computer chips.

 

China’s efforts to weaponize supply chains also predate U.S. chip controls, some analysts point out. Concerned about depending on antagonistic nations for oil and technology, the government has for decades carried out plans to build up strategic industries. And in 2010, China cut off rare earth exports to Japan during a maritime dispute.

 

It’s not clear when Chinese officials started developing the rare earths licensing system. But Mr. Trump’s aggressive actions — including new fees for Chinese-owned ships that dock at U.S. ports — have given Beijing the opportunity to try out these measures.

 

In April, after Mr. Trump imposed additional tariffs of 34 percent on China, Beijing rolled out an initial rare earth licensing system for exports to automakers and defense industries. U.S. businesses panicked as mineral supplies dwindled. Ford Motor and other auto companies stopped some production. Mr. Trump responded by escalating his tariffs to a minimum of 145 percent, bringing much trade between the countries to a halt.

 

In meetings this spring and summer, the countries restored a fragile truce in which the United States reduced its tariffs and China allowed mineral exports to flow more easily. But the United States has continued to issue technology controls, prompting painful countermeasures by China.

 

China’s much more expansive minerals licensing system followed a Sept. 29 move by the United States to expand trade restrictions to the subsidiaries of any company on the so-called entity list, which restricts the kind of U.S. technology they can buy.

 

Analysts say Chinese officials viewed the move as disrupting a tentative thaw after Mr. Trump spoke with Mr. Xi by phone less than two weeks earlier and said they had agreed to a preliminary deal to divest TikTok’s U.S. operations from its Chinese parent company.

 

Beijing responded with other restrictive measures, too. It announced controls on equipment needed to make batteries for electric cars, opened an antimonopoly investigation into the U.S. chipmaker Qualcomm, imposed additional port fees on U.S. ships and added several American businesses to a restricted trade list.

 

But the mineral restrictions stand out for the authority they allow Beijing to claim over the global supply of the tiny chips that power virtually all electronics.

 

“It scares the rest of the world how far China is willing to go in upending the global supply chain,” said Xiaomeng Lu, a director with Eurasia Group, a political consultancy and research group in Washington.

 

Chris Miller, a professor at Tufts University and the author of “Chip War: The Fight for the World’s Most Critical Technology,” said that the implications of China’s new licensing system could be “extraordinarily broad,” affecting almost all semiconductors made globally.

 

Companies and governments in the United States, Europe, Japan, India, South Korea and elsewhere are also concerned about the extensive corporate information that the Chinese government is requesting in the licensing process.

 

Foreseeing “a lot of resistance” to providing that information, Dr. Miller said it could accelerate efforts to build non-Chinese supply chains for rare earths. The argument is similar to one that critics of U.S. technology controls have long made, that they could push the world to adopt non-U.S. chip technology.

 

The United States and China are each leveraging a supply chain that the other has struggled for years to boost domestically. But while China has spent billions on its chip industry, spurring the growth of its own chipmakers, the United States could need years to restart rare earth production.

 

“If China is able to get around the chip restrictions but it takes the U.S. longer to get around the rare earths controls, that’s going to be a big problem for the United States,” said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics.

 

Yeling Tan, a professor at Oxford University, said the events of the past months had put China in a stronger negotiating position than the one it held during the first Trump administration. But she said the controls “might end up being costly for China, in terms of how the extraterritorial requirements might alarm other trading partners.”

 

“This threatens to undermine China’s credibility as a reliable trading nation," she said. “It is an incredibly delicate balance to strike.”” [1]

 

China's recent restrictions on rare earth exports would not cripple all American industries, as the text above claims, but they would cause significant disruptions and harm key military sectors. The most severe and immediate impact is designed to target the U.S. defense industrial base, which is heavily dependent on China for refined rare earths.

Targeted impact on military industries

Military industries are a primary target of China's restrictions, which Beijing can use as a "powerful negotiating tactic".

 

    Essential military hardware: Rare earth elements (REEs) are indispensable for producing a vast array of U.S. weapons systems. This includes Tomahawk missiles, F-35 fighter jets, Virginia and Columbia-class submarines, radar systems, and smart bombs.

    Direct denial of licenses: The new rules, effective December 1, 2025, reportedly deny export licenses to foreign militaries and companies producing military-use goods, automatically rejecting requests for military applications.

    Limited alternatives: While the U.S. can source some raw materials elsewhere, it lacks the domestic processing and refining capacity to replace China's output in the short term, especially for heavy REEs.

    Strategic goal: Beyond direct disruption, China's strategy aims to undermine the U.S. military as an export market. By driving up production costs and forcing reallocation of resources, Beijing makes U.S. military exports less competitive globally.

 

Widespread disruption across commercial industries

Beyond the military, rare earth export controls are expected to cause supply disruptions and higher costs across many critical commercial sectors that depend on rare earths for advanced components and technology.

 

    Automotive: Rare earth magnets are essential for electric vehicle (EV) motors and many other car parts, including power steering and windshield wipers. Automakers like Ford have already faced temporary production shutdowns due to past rare earth shortages.

    Technology: The semiconductor and electronics industries rely on rare earths for producing components for smartphones, computers, lasers, and other high-tech devices. Licensing requirements could cause delays and higher costs for companies like Apple, Nvidia, and Intel.

    Renewable energy: Rare earth magnets are critical for improving the efficiency of wind turbines, a major component of renewable energy infrastructure.

    Consumer goods: Beyond advanced technologies, many consumer products, from televisions to portable phones, contain rare earth elements.

 

Short-term crisis vs. long-term vulnerability

While China's restrictions won't paralyze the entire U.S. economy, they exploit existing vulnerabilities that cannot be solved quickly.

 

    Immediate shortages: In the short term, companies will face supply disruptions and increased costs, potentially leading to production slowdowns.

    Domestic development is slow: Though the U.S. is investing heavily in building its own rare earth supply chain, from mining to processing, analysts estimate it could take a decade or more to achieve full independence.

    Broader control: China's controls extend beyond raw materials to the export of related processing and magnet-making technology, hindering the U.S. ability to rapidly scale up domestic alternatives.

 

Since rare earth elements are indispensable for producing many weapons, including single use, destroyed upon reaching its target, Tomahawk missiles, America would be well advised to use them very sparingly.

 

1. China’s Rare Earth Restrictions Aim to Beat U.S. at Its Own Game. Swanson, Ana; Tobin, Meaghan.  New York Times (Online) New York Times Company. Oct 16, 2025.