China Tightens Grip on Rare Earths, Escalating Trade Tensions with the US

Fri Oct 17 2025 22:31:36 GMT+0300 (Eastern European Summer Time)

China's new export rules on rare earth elements underline its dominant position in the global supply chain, provoking a strong response from the US amid ongoing trade conflicts.

In a decisive move, China has imposed new restrictions on rare earth exports, which could intensify the ongoing trade war with the US. This follows 'announcement No. 62 of 2025', requiring foreign companies to seek Chinese government permission for exports containing rare earth elements. The US government, led by President Trump, has responded aggressively, threatening tariffs and export controls. Analysts suggest that while China's actions significantly impact supply chains, the economic implications for China itself remain minimal, even as it seeks to gain leverage in negotiations with the US.

Last week, China's Ministry of Commerce published a document that went by the name of announcement No. 62 of 2025.

But this wasn't just any bureaucratic missive. It has rocked the fragile tariffs truce with the US.

The announcement detailed sweeping new curbs on its rare earth exports, tightening Beijing's grip on the global supply of critical minerals and reminding Donald Trump how much leverage China holds in the trade war.

China has a near-monopoly in the processing of rare earths — crucial for the production of everything from smartphones to fighter jets.

Under the new rules, foreign companies now need the Chinese government's approval to export products containing even a tiny amount of rare earths and must declare their intended use.

In response, US President Donald Trump threatened to impose an additional 100% tariff on Chinese goods and entailed export controls on key software.

This is China versus the world. They have pointed a bazooka at the supply chains and the industrial base of the entire free world, and we're not going to have it, said US Treasury Secretary Scott Bessent.

On Thursday, China said the US had deliberately provoked unnecessary misunderstanding and panic over the rare earths restrictions.

Provided the export licence applications are compliant and intended for civilian use, they will be approved, a commerce ministry spokesperson added.

This week, the world's two biggest economies also imposed new port fees on each other's ships.

The flare-up in the trade war brings to an end months of relative calm after top US and Chinese officials brokered a truce in May.

Later this month, Trump and China's President Xi Jinping are expected to meet and experts have told the BBC that the rare earths restrictions will give China the upper hand.

China's new controls are bound to shock the system as they target vulnerabilities in American supply chains, said international business lecturer Naoise McDonagh from Australia's Edith Cowan University.

The timing has really upset the kind of timeline for negotiations that the Americans wanted, he added.

Rare earth minerals are essential for the production of a vast range of technology such as solar panels, electric cars, and military equipment.

For example, a single F-35 fighter jet is estimated to need more than 400kg (881.8lb) of rare earths for its stealth coatings, motors, radars, and other components.

China's rare earth exports account for around 70% of the world's supply of metals used for magnets in electric vehicle motors, said Natasha Jha Bhaskar from advisory firm Newland Global Group.

Beijing has worked hard to gain dominance over global rare earth processing capacity, nurturing a vast talent pool and a well-established research and development network.

While the US and other countries are investing heavily to develop alternatives to Chinese supplies, experts suggest it will take at least five years to catch up.

Despite the restrictions expanding measures announced in April that had already caused a global supply crunch, analysts say China's economy is unlikely to be hurt significantly by the drop in rare earth exports, representing less than 0.1% of China's annual gross domestic product (GDP).

The US remains under pressure to reconsider its trade policies as the two nations seek to navigate this complex landscape of global economics.