Last week, China’s Ministry of Commerce released Announcement No. 62 of 2025, a move that has shaken the fragile trade truce with the United States. The announcement imposes new restrictions on rare earth exports, giving Beijing tighter control over the global supply of these critical minerals. China holds a near-monopoly on rare earth processing, which are essential for products ranging from smartphones to fighter jets.
Under the new rules, foreign companies must obtain Chinese government approval to export products containing even minimal amounts of rare earths and declare their intended use. In response, US President Donald Trump threatened to impose a 100% tariff on Chinese goods and restrict key software exports. US Treasury Secretary Scott Bessent warned, “This is China versus the world. They have pointed a bazooka at the supply chains and the industrial base of the entire free world.”
China countered, saying the US had caused unnecessary panic. A spokesperson from the commerce ministry clarified that export licenses would be approved if applications comply with regulations and are intended for civilian use. Meanwhile, both countries have also implemented new port fees on each other’s vessels, signaling escalating tensions.
The flare-up ends months of relative calm following a truce in May. Analysts say the rare earth restrictions give China significant leverage in upcoming meetings between Trump and President Xi Jinping. International business lecturer Naoise McDonagh noted that the restrictions “shock the system” by targeting vulnerabilities in American supply chains.
Rare earth minerals are vital for a wide range of technologies, including solar panels, electric cars, and military equipment. A single F-35 fighter jet, for example, requires more than 400kg of rare earths for stealth coatings, motors, and radars. China controls around 70% of the world’s rare earths used in electric vehicle motors. Its dominance comes from a highly skilled workforce and advanced R&D network, which remain ahead of global competitors.
While the US and other countries are investing in alternatives, experts say it will take years to catch up. Australia has potential due to its large deposits, but its processing infrastructure is still underdeveloped. Even with a national effort, it could take at least five years to rival China.
The new export restrictions expand measures introduced in April, which previously caused global shortages. Official data shows China’s rare earth exports fell more than 30% in September compared to last year, but the impact on China’s economy is minimal, as rare earths represent less than 0.1% of GDP. The strategic value, however, is significant, giving Beijing leverage in negotiations.
Despite condemning the move, Bessent signaled willingness for dialogue, saying he is optimistic the issue can be de-escalated. China’s Foreign Minister Wang Yi echoed the need for effective communication to maintain stable US-China relations. Analysts note that curbing rare earth exports is China’s “best immediate lever” to pressure Washington for favorable trade terms.
Experts also note that while the US has some strategic options, such as reducing tariffs or imposing technology restrictions, these measures would likely have limited impact. Unlike US export controls, which China can absorb, cutting off rare earth supplies could disrupt industries worldwide, highlighting the unique leverage China holds in the global market.
