China has introduced sweeping new export restrictions requiring companies to seek permission if products contain 0.1% or more rare-earth materials sourced from China. With Beijing producing nearly 90% of the world’s rare earths, the measure amounts to a major escalation in the US-China trade fight. The restrictions directly target semiconductors, which power phones, computers, AI data centres, cars, and renewable energy technology, the Wall Street Journal reported.
Global supply chain disruption
Industry experts warn that tech companies will struggle to prove their products fall below the 0.1% threshold. That makes compliance nearly impossible, leaving everything from chip equipment to solar panels at risk. Analysts say the restrictions could spark a US recession if China pushes aggressively, given AI-driven capital spending is now a core growth engine. The move highlights China’s leverage over technology supply chains that span the US, Taiwan, Japan, and the Netherlands.
US response under debate
President Trump acknowledged the move at a cabinet meeting, saying Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick are preparing a response. Trump suggested the US could cut imports of Chinese materials altogether, while analysts expect a mix of higher tariffs and fresh export controls. The White House views the step as a power play designed to force concessions on tariffs and tech restrictions ahead of Trump’s expected meeting with Xi Jinping in South Korea.
Leverage ahead of talks
Beijing has repeatedly used rare-earths as a bargaining tool this year. Restrictions in April rattled supply chains before a temporary trade truce in June. Now, China’s commerce ministry has expanded controls to cover not just industrial use but potential military applications. People familiar with Beijing’s strategy told the Wall Street Journal that the move is aimed at testing Trump’s eagerness for a deal and pushing for removal of US tariffs and export controls.
Rising economic risks
The US currently imposes tariffs of 30%–50% on Chinese imports, while China’s average duties on US exports stand near 33%. Despite subsidies rolled out under both Trump and Biden to encourage domestic semiconductor and rare-earth production, US capacity remains limited. Analysts warn this latest standoff could accelerate reshoring efforts by tech companies but also risk severe short-term supply shocks.
Looking ahead
Experts remain divided on whether China will fully enforce the new rules or use them as leverage. Some see it as a “blackmail tactic” unlikely to be carried through, while others warn that even the threat could cause companies to shift investment strategies. With AI at the center of global economic growth, the rare-earth escalation could redefine the balance of power in the technology race.
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