In a dramatic escalation of economic tensions, China’s latest move to tighten controls over rare earth mineral exports has sent shockwaves through global markets, reignited the U.S.-China trade war, and left industries worldwide scrambling for answers. The new rules, announced in mid-October 2025 and set to take effect later this year, require foreign businesses and governments to obtain licenses from Beijing to trade products containing critical minerals—even if the transactions occur outside China’s borders. These minerals are essential to manufacturing everything from computer chips and electric vehicles to advanced missile systems.
According to Business Standard, China’s dominance in rare earth production grants it considerable leverage. The country accounts for more than two-thirds of global output, and its grip on other strategic industries only amplifies its power. Analysts suggest that, with these new restrictions, China may be better positioned than the U.S. to weaponize supply chains. “The U.S. now has to face up to the fact it has an adversary which can threaten substantial parts of the U.S. economy,” said Henry Farrell, a political scientist at the Johns Hopkins School of Advanced International Studies. He added that the two superpowers are now “in a much more delicate stage of mutual interdependence.”
The U.S. government, caught off guard by Beijing’s announcement, quickly responded with threats of its own. President Donald Trump, who has made tough-on-China rhetoric a hallmark of his administration, threatened on October 17 to double down on tariffs—imposing a 100 percent tax on Chinese imports starting November 1 unless Beijing backs down. “Well, we’re in one now. Look, we have 100 percent tariff, if we didn’t have tariffs we would be exposed as being a nothing, we would have no defense,” Trump told reporters, as quoted by Newsweek.
Trump’s reaction was swift and severe. He threatened to cancel a planned meeting with Chinese leader Xi Jinping at the upcoming Asia Pacific Economic Cooperation forum in South Korea, scheduled for October 31 and November 1. The uncertainty sent stock markets into a tailspin, with investors fearing a return to the tit-for-tat tariff hikes that roiled markets in previous years.
U.S. officials were quick to condemn China’s move. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer described the licensing system as a “global power grab,” vowing that the United States stood ready to respond with tariffs if China implemented its new rules. “Our expectation is that this never goes into effect,” Greer said, according to Business Standard. On social media, Greer further charged, “China’s expansive rule to control the flow of rare earths is a repudiation of the U.S.-China agreement reached six months ago in Geneva. The administration is prepared to take strong actions if China moves forward with this escalatory new regime.”
China, for its part, has tried to calm global nerves and push back against American accusations. At a press briefing, Ministry of Commerce spokeswoman He Yongqian clarified that the new export controls are “not an outright ban.” She insisted, “As long as the rare earths are used for civil purposes, [the exports] will be approved.” He described the measures as “a legitimate measure to safeguard our own rights,” emphasizing that the purpose is to prevent illegal exports that could be used for weapons of mass destruction. “The U.S. interpretation is a major distortion of the reality and the measures taken by China, and it is deepening misunderstanding and fueling panic,” He said, according to Newsweek. “This is not a new policy.”
Beijing has also underscored that its controls align with international practices, noting that the United States itself has long maintained strict export controls for national security reasons. In an official statement, Chinese Foreign Ministry spokesperson Lin Jian said, “China took export controls on relevant items in accordance with the law to better safeguard world peace and regional stability, and fulfill non-proliferation and other international obligations. The measures are in line with international practice. China’s position has been consistent and clear.”
The rules, which will take effect December 1, 2025, stipulate that foreign entities must obtain a license to export products containing more than 0.1 percent of minerals sourced from China. Notably, the restrictions specifically prohibit U.S. defense contractors from receiving Chinese rare earth materials and ban the export of technologies related to extraction, processing, magnet production, and equipment servicing. As Reuters reported, this has left manufacturers worldwide wondering if even trace amounts of Chinese rare earths in their products will trigger the new licensing requirements.
The U.S. has not been idle in this arena. Over the past three years, Washington has imposed broad restrictions to prevent China from gaining an edge in advanced artificial intelligence and chip technologies. These restrictions, including the use of the foreign direct product rule, have effectively barred companies worldwide from sending high-tech chips or manufacturing tools to Chinese firms like Huawei if U.S. technology is involved. While foreign governments initially bristled at these measures, many complied to avoid losing access to U.S. tech.
Now, China’s counter-move is seen by some analysts as a mirror image of the U.S. strategy—perhaps even an improvement. “China has really begun to figure out how to take a leaf from the U.S. playbook and in a certain sense play that game better than the U.S. is currently playing it,” Farrell observed.
Behind the scenes, the rhetoric has grown increasingly personal. Treasury Secretary Bessent described China’s chief trade negotiator, Li Chenggang, as “slightly unhinged” and “disrespectful” during August talks, alleging that Li threatened to “unleash chaos on the global system” if the U.S. went ahead with new port fees. Chinese officials dismissed these remarks as “grossly distorted,” reiterating that Beijing had notified Washington before announcing the licensing regime and was “taking the initiative to negotiate and communicate with the United States.”
Despite the heated exchanges, both sides have left the door open to further talks. The tariff truce between the U.S. and China is set to expire around November 9, but officials hinted that another extension could be possible. The upcoming meeting between Trump and Xi in South Korea is viewed as a critical juncture that could either stabilize relations or trigger a fresh wave of economic conflict.
For now, the world watches anxiously as the two economic giants square off over the minerals that power modern technology. With so much at stake—from the future of electric vehicles to the security of global supply chains—every word and action is being scrutinized. The next few weeks could prove decisive in shaping the balance of power in the high-tech world.
Amid the uncertainty, one thing is clear: the era of easy trade between the U.S. and China is over, and the rules of the game are being rewritten in real time.