China Tightens Grip on Rare Earth Exports, Escalating Economic Showdown with U.S.

Key Facts

Published: October 9, 2025 Location: Beijing Source: Wall Street Journal, CNBC, NTD, BBC

• China imposed sweeping new export controls on rare earths, covering materials, technology, and labor.
• The rules target goods containing over 0.1% of Chinese rare earths and take effect December 1.
• Analysts warn the move could cripple global AI and semiconductor supply chains.
• The U.S. is weighing new tariffs, export bans, and domestic mining investments in response.

by Emmitt Barry, with reporting from Washington D.C. Bureau Staff

BEIJING (Worthy News) – China has unveiled sweeping new export restrictions on rare-earth materials and related technologies — a move analysts describe as a near-unprecedented escalation in its economic confrontation with the United States. The rules, announced Thursday by China’s Commerce Ministry, could disrupt global supply chains for critical technologies, from semiconductors and solar panels to electric vehicles and advanced weapons systems.

Under the new regulations, foreign companies must obtain a license from Beijing to export any goods containing more than 0.1% of China-sourced rare earths or those produced using Chinese extraction, refining, or magnet-making technologies. The rules, set to take effect December 1, mark one of China’s most aggressive uses of its dominance in the rare-earth market — a sector in which it controls roughly 90% of global production and 92% of refining capacity.

Beijing said the measures are aimed at “safeguarding national security” and preventing the “misuse” of rare earths for military purposes. But Western officials and experts see the move as a calculated power play designed to pressure Washington ahead of an expected meeting between President Donald Trump and Chinese leader Xi Jinping later this month in South Korea.

“This is the economic equivalent of nuclear war — an intent to destroy the American AI industry,” warned Dmitri Alperovitch, co-founder of the Silverado Policy Accelerator. “It’s blackmail ahead of Trump and Xi’s trade talks.”

New Restrictions and Global Fallout

The new export controls extend beyond raw materials to include intellectual property, mining technology, refining processes, and even labor associated with rare-earth production. Chinese citizens are now barred from working on unauthorized overseas mining or magnet-manufacturing projects.

Beijing will deny export permits to foreign entities linked to military industries or those on watch lists for national-security concerns. Companies producing advanced chips, AI systems with potential defense uses, or semiconductor testing and fabrication tools will face case-by-case scrutiny.

“These rare-earth minerals and the ability to refine them are just the basis of modern civilization,” said Dean Ball, a former White House AI adviser. “If implemented aggressively, these rules could trigger a U.S. recession.”

The measures have sent shockwaves through industries dependent on rare earths — including renewable energy, electric vehicles, and consumer electronics. Even minor trace amounts of rare-earth materials now fall under the 0.1% threshold, making compliance extremely difficult for global tech manufacturers.

Washington’s Response and Potential Retaliation

The Trump administration signaled a firm response. “We import from China massive amounts — and maybe we will have to stop doing that,” Trump said at a cabinet meeting, directing Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick to devise countermeasures.

Possible U.S. options include raising tariffs, tightening semiconductor export bans, and accelerating domestic mining and refining capacity. The United States currently imposes tariffs ranging from 30% to 50% on Chinese imports, while Beijing’s average tariffs on U.S. goods stand at around 33%.

Experts say the rare-earth gambit is designed to strengthen Xi’s leverage as trade talks resume. During the last round of negotiations in Madrid, Chinese Vice Premier He Lifeng pressed for full removal of U.S. tariffs and export restrictions.

“Beijing has realized it holds the leverage in this sector — and it’s not shy about using it,” said Wendy Cutler, former U.S. trade negotiator. “This is about extracting concessions before the next round of talks.”

Strategic and Military Implications

Rare earths are indispensable for modern defense technology, powering radar systems, jet engines, missile guidance, and AI-enabled targeting systems. By extending export restrictions to technologies and processes, Beijing is mirroring U.S. efforts to curb China’s access to chip-making equipment and advanced semiconductors.

Trade analyst Alex Capri called the timing “highly strategic,” saying China’s move “mirrors Washington’s own playbook — targeting vulnerabilities in defense and AI supply chains.”

Analysts believe the restrictions are unlikely to constitute a total ban. Instead, they create a powerful negotiation tool, allowing China to selectively approve exports while keeping global manufacturers dependent on its approvals.

“This will give China more power than just a blunt ban,” noted Dan Wang of Eurasia Group. “It’s leverage wrapped in bureaucracy.”

Global Repercussions

Europe, Japan, and South Korea — all heavily reliant on Chinese rare earths — are expected to face major disruptions. The European Chamber of Commerce warned that its members have already lost millions due to export delays.

Meanwhile, the U.S. and its allies are scrambling to build new supply chains. Australia, Canada, and Vietnam are ramping up production, while Washington explores incentives for domestic processing. But experts caution that replicating China’s industrial ecosystem could take years.

As the global economy braces for impact, the rare-earth standoff underscores the deepening technological and geopolitical rivalry between the world’s two largest powers.

“This is no longer just a trade dispute,” said George Chen of The Asia Group. “It’s a contest for control over the next generation of global industry.”

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