Last week, China’s Ministry of Commerce issued a document officially titled “Announcement No. 62 of 2025.”
However, this was far from a routine bureaucratic procedure. It has significantly impacted the delicate tariff truce with the United States.
The announcement outlined extensive new restrictions on China’s rare earth exports, a move that reinforces Beijing’s dominance over the global supply of these vital minerals. It also served as a reminder to the Trump administration of China’s substantial leverage in the ongoing trade dispute.
China holds a near-monopoly in the processing of rare earth elements, which are critical for manufacturing a wide range of products, from smartphones to advanced military aircraft.
Under the newly implemented regulations, foreign companies are now required to obtain approval from the Chinese government to export products containing even trace amounts of rare earth elements, and they must declare the intended use of these materials.
In response, US President Donald Trump threatened to impose an additional 100% tariff on Chinese goods and implement export controls on critical software technologies.
“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,” stated US Treasury Secretary Scott Bessent.
On Thursday, a spokesperson for the Chinese Commerce Ministry retorted that shortly after the China-US economic and trade talks in Madrid in September, “and despite repeated dissuasion from the Chinese side, the US side introduced 20 measures to suppress China within just over 20 days.”
This week also saw the imposition of new port fees on each other’s ships by the world’s two largest economies.
This resurgence in trade tensions marks an end to the relative calm that had prevailed for months after senior US and Chinese officials brokered a truce in May.
President Trump and Chinese President Xi Jinping are expected to meet later this month, and experts have indicated to the BBC that the restrictions on rare earth exports will give China a strategic advantage.
Naoise McDonagh, a lecturer in international business at Edith Cowan University in Australia, commented that China’s new controls are poised to “shock the system” by targeting vulnerabilities within American supply chains.
“The timing has really upset the kind of timeline for negotiations that the Americans wanted,” he added.
Rare earth minerals are crucial for the production of a wide array of technologies, including solar panels, electric vehicles, and military hardware.
For instance, it is estimated that a single F-35 fighter jet requires over 400kg (881.8lb) of rare earth elements for its stealth coatings, motors, radars, and other essential components.
Natasha Jha Bhaskar from the Newland Global Group noted that China’s rare earth exports also account for approximately 70% of the global supply of metals used for magnets in electric vehicle motors.
Marina Zhang, a researcher in critical minerals at the University of Technology Sydney, stated that Beijing has worked diligently to establish its dominance in global rare earth processing capacity.
She added that the country has cultivated a vast talent pool in the field, and its research and development network is years ahead of its competitors.
While the US and other nations are making substantial investments to develop alternative sources of rare earth supplies, they remain some distance from achieving that objective.
Australia, with its own significant deposits of rare earth elements, has been identified as a potential challenger to China. However, its production infrastructure remains underdeveloped, making processing relatively expensive, according to Ms. Zhang.
“Even if the US and all its allies make processing rare earths a national project, I would say that it will take at least five years to catch up with China.”
The new restrictions expand on measures announced by Beijing in April, which caused a global supply crunch before a series of agreements with Europe and the US eased the shortages.
The latest official figures from China indicate that exports of these critical minerals were down by more than 30% in September compared to the previous year.
However, analysts suggest that China’s economy is unlikely to be significantly affected by the drop in exports.
Prof. Sophia Kalantzakos from New York University noted that rare earth elements constitute a very small part of China’s $18.7tn annual economy.
Some estimates place the value of these exports at less than 0.1% of China’s annual gross domestic product (GDP).
While the economic value of rare earth elements to China may be limited, their strategic importance “is huge,” she stated, as they provide Beijing with greater leverage in negotiations with the US.
Despite accusing China of “betrayal,” Bessent has indicated that negotiations remain a possibility.
“I believe China is open to discussion and I am optimistic this can be de-escalated,” he said.
Prof. Kalantzakos suggested that China’s recent actions are part of “getting its ducks in a row” ahead of trade talks with the US.
Ms. Bhaskar commented that, in curbing rare earth exports, Beijing has found its “best immediate lever” to pressure Washington for a favorable deal.
Jiao Yang from Singapore Management University believes that while Beijing may hold the upper hand in the short term, Washington does possess some strategic options.
Prof. Jiao suggested that the US could offer to lower tariffs, which is likely to appeal to Beijing as the trade war has significantly impacted its manufacturers.
China’s economy relies heavily on income from its manufacturing and export sectors. The latest official figures show its exports to the US were down by 27% compared to a year ago.
Prof. McDonagh stated that Washington can also threaten China with additional trade restrictions to hinder the development of its technology sector.
For example, the White House has already targeted China’s need for high-end semiconductors by blocking its purchases of Nvidia’s most advanced chips.
However, experts suggest that such measures are likely to have a limited impact.
Prof. McDonagh commented that measures targeting Beijing’s tech industry may slow China but will not “stop it dead in the water.”
He added that China has demonstrated through its recent economic strategy that it is willing to endure some pain to achieve its long-term objectives.
“China can carry on even if it costs a lot more under US export controls.”
“But if China cuts off these rare earth supplies, that can actually stop everyone’s industry. That’s the big difference.”
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