China's Rare Earths Advantage: A Strategic Move with Global Impact
China's rare earths dominance has become a powerful tool in the ongoing trade war.
In a recent move that has sent shockwaves through global markets, China's Ministry of Commerce unveiled a set of sweeping restrictions on rare earth exports. This announcement, labeled as 'Announcement No. 62 of 2025', has not only disrupted the fragile tariffs truce with the US but also highlighted China's significant leverage in the trade negotiations.
The Rare Earths Advantage: A Global Monopoly
China's near-monopoly in the processing of rare earths is a critical advantage. These minerals are essential for the production of a wide range of technologies, from smartphones and electric cars to advanced military equipment. For instance, a single F-35 fighter jet requires an estimated 400kg of rare earths for its various components, including stealth coatings and motors.
The new rules introduced by China require foreign companies to seek approval from the Chinese government for exporting products containing rare earths, even in tiny amounts. This move has prompted a strong response from US President Donald Trump, who threatened to impose additional tariffs and export controls on key software.
A Trade War Escalation
The flare-up in the trade war between the world's two largest economies comes after months of relative calm. Top officials from both countries had brokered a truce in May, but the recent restrictions on rare earths exports have brought tensions to the forefront once again.
Experts predict that China's upper hand in the rare earths market will give it an advantage in the upcoming trade talks with the US later this month. According to Naoise McDonagh, an international business lecturer from Edith Cowan University, China's new controls will 'shock the system' by targeting vulnerabilities in American supply chains.
China's Dominance: Talent and Research
Marina Zhang, a critical minerals researcher from the University of Technology Sydney, explains that China's dominance in rare earth processing is a result of its vast talent pool and advanced research and development network. While the US and other countries are investing in alternatives, they are still far from achieving the level of China's expertise and infrastructure.
Australia, with its large deposits of rare earths, has been seen as a potential challenger to China's dominance. However, as Ms. Zhang points out, Australia's production infrastructure is still underdeveloped, making processing relatively expensive.
Strategic Value vs. Economic Value
While rare earths make up a very small part of China's massive economy, their strategic value is immense. Sophia Kalantzakos, a professor from New York University, emphasizes that rare earths give Beijing significant leverage in talks with the US. Despite the accusations of 'betrayal', US Treasury Secretary Scott Bessent has expressed optimism about de-escalating the situation through negotiations.
A Game of Leverage
Jiao Yang from Singapore Management University believes that while Beijing holds the advantage in the short term, Washington has strategic options. The US could offer to lower tariffs, which might be an attractive proposal for Beijing, considering the impact of the trade war on its manufacturers. Additionally, Washington can threaten further trade restrictions to hinder China's technology sector development.
However, experts caution that measures targeting Beijing's tech industry may only slow down China's progress but won't halt it completely. China has demonstrated its willingness to endure short-term pain to achieve long-term goals, as seen in its recent economic strategy.
The Power of Rare Earths
And this is the part most people miss: the true power of rare earths. While China can withstand the impact of US export controls, the reverse is not true. If China decides to cut off rare earth supplies, it could potentially bring industries around the world to a standstill. That's the crucial difference and the reason why rare earths have become such a controversial and powerful tool in the trade war.
So, what do you think? Is China's rare earths advantage a game-changer in the trade negotiations? Share your thoughts in the comments below!
