China’s Ministry of Commerce last week released “Announcement No. 62 of 2025,” a document that has shaken the fragile tariff truce between Beijing and Washington.
The announcement introduces sweeping new restrictions on rare earth exports, tightening China’s control over the global supply of these critical minerals and signaling its growing leverage in the ongoing trade dispute with the United States.
China holds a near-monopoly in processing rare earth elements, which are essential for the production of items ranging from smartphones and electric cars to fighter jets.
Under the new regulations, foreign companies must obtain Chinese government approval before exporting any product that contains even trace amounts of rare earths. Exporters must also declare how the materials will be used.
In response, US President Donald Trump threatened to impose an additional 100% tariff on Chinese goods and to restrict exports of key software technologies to China.
“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,” said US Treasury Secretary Scott Bessent.
China’s Commerce Ministry, however, accused the United States of creating “unnecessary misunderstanding and panic” over the new measures. The ministry said export licence applications intended for civilian purposes would be approved once they met compliance requirements.
The latest dispute has ended several months of relative calm following a truce brokered in May by top officials from both nations. The two sides also imposed new port fees on each other’s ships this week, further escalating tensions.
Later this month, President Trump and Chinese President Xi Jinping are expected to meet, and analysts say the rare earth restrictions will give Beijing an upper hand in negotiations.
“This move is bound to shock the system because it targets key vulnerabilities in American supply chains,” said Naoise McDonagh, an international business lecturer at Edith Cowan University in Australia. “The timing has upset the negotiation timeline the Americans were hoping for.”
Rare earth minerals are crucial for modern technology, including solar panels, electric vehicles, and military hardware. An F-35 fighter jet alone requires more than 400 kilograms of rare earth materials for its stealth coating, motors, radars, and other components.
China supplies about 70% of the world’s metals used in magnets for electric vehicle motors, according to Natasha Jha Bhaskar of the Newland Global Group.
Beijing’s dominance stems from decades of investment in processing infrastructure, research, and talent, said Marina Zhang, a researcher at the University of Technology Sydney.
Although the United States and its allies are investing heavily to develop alternative supply chains, experts say they remain years away from reducing dependence on China. Australia has large reserves of rare earths but lacks the infrastructure and cost efficiency needed for large-scale processing.
“Even if the US and all its allies make processing rare earths a national project, it will take at least five years to catch up with China,” Zhang said.
The new restrictions expand on measures introduced by Beijing in April, which caused a global supply crunch before temporary deals with Europe and the US eased shortages.
Official data from China show that rare earth exports fell by more than 30% year-on-year in September. However, analysts say this drop is unlikely to affect China’s economy significantly since rare earths account for less than 0.1% of its $18.7 trillion GDP.
While the economic impact may be small, the strategic value is immense, said Professor Sophia Kalantzakos of New York University. “Their value lies in the leverage they provide Beijing in trade negotiations.”
Despite accusing China of “betrayal,” Treasury Secretary Bessent said he remained open to dialogue. “I believe China is open to discussion and I am optimistic this can be de-escalated,” he said.
During a meeting with Stephen Schwarzman, CEO of US private equity group Blackstone, China’s Foreign Minister Wang Yi also called for calm. “The two sides should engage in effective communication, properly resolve differences, and promote stable, healthy, and sustainable development of China-US relations,” Wang said.
According to Professor Kalantzakos, Beijing’s recent moves are part of a calculated strategy ahead of trade talks. By curbing rare earth exports, she said, China is “using its most immediate lever to pressure Washington for a favorable deal.”
Singapore Management University’s Jiao Yang noted that while China holds the short-term advantage, the US still has strategic tools it could use, including lowering tariffs or tightening technology restrictions.
Washington has already curbed China’s access to advanced semiconductor chips from Nvidia and other US firms. However, experts believe such measures may slow China’s progress but will not stop it entirely.
“China can carry on even if it costs more under US export controls,” McDonagh said. “But if China cuts off rare earth supplies, that could halt production in multiple industries worldwide. That’s the real difference.”
