On October 17, 2025, China escalated its economic confrontation with the West by expanding export controls on rare earth metals, a move that sent ripples through global supply chains and set the stage for a high-stakes showdown with the United States and its allies. The new regulations, announced by Beijing and reported by the Centre for Eastern Studies and Reuters, add holmium, erbium, thulium, europium, and ytterbium to an already growing list of restricted elements. These metals, part of the 12 out of 17 rare earths now under Chinese export control, are crucial for the defense sector and the manufacture of semiconductors and magnets used in everything from electric vehicles to advanced weaponry.
The tightened restrictions are not just about limiting exports. For the first time, Chinese citizens are barred from participating in any foreign project related to rare earth exploration, extraction, processing, or magnet production unless they receive explicit government approval. This extraterritorial reach is unprecedented for China, signaling a significant shift in how Beijing wields its economic power. Authorities have justified the move by citing national security concerns, the protection of China’s national interests, and international obligations to prevent the proliferation of weapons.
China’s dominance in the rare earth market is formidable. According to ABC News and Reuters, the country mines 70 percent of the world’s rare earths and processes an astonishing 90 percent. This near-monopoly has given Beijing considerable leverage, especially as these materials are indispensable for both civilian industries and military applications. As a Chinese Commerce Ministry spokesperson explained, “Rare-earth-related items have dual-use properties for both civilian and military applications. Implementing export controls on them is an international practice.”
The latest round of restrictions will come into effect on December 1, 2025. Foreign companies seeking to purchase rare earth magnets or semiconductor materials containing at least 0.1 percent heavy rare earths from China will need to secure special approvals from the Commerce Ministry. They must also provide detailed information about the intended use of these materials. In addition, China is placing limits on the export of specialized technological equipment needed to refine rare earths, further tightening the screws on global supply.
For the United States and its allies, the timing of China’s announcement could not be more critical. The new measures were unveiled just weeks before a scheduled meeting between U.S. President Donald Trump and Chinese President Xi Jinping. The U.S., which relies heavily on Chinese rare earths for its defense and technology sectors, has responded with characteristic force. President Trump threatened to impose an additional 100 percent tariff on Chinese exports starting November 1, 2025, in direct retaliation for Beijing’s move. If enacted, these tariffs would raise the total duty on many Chinese goods to 130 percent—a level not seen since earlier in the year, before both sides agreed to a temporary de-escalation to allow for trade talks.
“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,” declared U.S. Treasury Secretary Scott Bessent in an interview with Fox Business on October 13. The rhetoric underscores just how high the stakes are, with both economic and geopolitical implications looming large.
As the U.S. scrambles to secure alternative sources of rare earths, Australia has emerged as a potential linchpin in the new supply chain. Canberra’s Treasurer, Jim Chalmers, told reporters in Washington, “Australia is very well placed” to service the global need for rare earths. “We will engage with our partners to make sure that we can be a very reliable supplier to meet the critical minerals needs of … the US and other markets,” Chalmers emphasized, signaling Australia’s readiness to step into the breach left by China’s restrictions.
Australia is no stranger to the rare earths game. The country is home to significant reserves, including neodymium, a key component for magnets used in wind turbines and electric vehicles. However, as Hayley Channer of the US Studies Centre noted, “90 percent of Australia’s lithium goes to China for processing.” This dependency has long been a source of concern for U.S. policymakers, who are eager to see more of Australia’s resources processed domestically or in allied countries.
In a bid to boost its own rare earths sector, Australia announced plans before its May 2025 parliamentary elections to create a $1.2 billion critical minerals reserve, with a particular focus on developing advanced processing techniques. The move is designed to help Australia capture more value from its resources and reduce reliance on Chinese processors.
Some progress is already evident. On October 8, 2025, U.S. firm Noveon Magnetics struck a deal with Lynas Rare Earths, Australia’s largest rare earths producer, to supply magnets to U.S. defense companies. The news sent Lynas’s share price soaring to a 14-year high, demonstrating the market’s appetite for alternatives to Chinese supply.
The rare earths saga is also playing out on the diplomatic stage. On September 24, Australia’s Trade Minister Don Farrell met with his U.S. counterpart, Jamieson Greer, in Malaysia. According to ABC News, Farrell asked, “How can we help America become great again?” Greer’s response was blunt: “Give us your critical minerals.” The urgency of the request reflects a broader U.S. strategy to diversify its sources of critical minerals. In addition to Australia, the U.S. has inked deals with Ukraine, the Democratic Republic of the Congo, and Pakistan, offering investment and security guarantees in exchange for access to vital resources.
Yet, the U.S.-Australia relationship has not been without its bumps. Earlier this year, President Trump imposed a 10 percent blanket tariff on most Australian exports, straining economic ties. Questions have also been raised about Australia’s defense spending under the AUKUS pact with the U.S. and UK, with Canberra’s 2 percent of GDP falling short of Trump’s 3.5 percent target for allies. Still, both leaders have maintained a cordial rapport, with Trump describing Australian Prime Minister Anthony Albanese as “very nice” and “very respectful.”
Looking ahead, the upcoming meeting between Trump and Albanese on October 20, 2025, is expected to put critical minerals front and center. As Canberra positions itself as a reliable partner for the U.S. and other Western nations, the global scramble for rare earths is reshaping alliances and strategies in ways that could have lasting repercussions.
With China tightening its grip and the West scrambling for alternatives, the rare earths race is far from over. The outcome will not only determine the future of advanced manufacturing and defense but could also redefine the balance of power in the 21st-century global economy.