US and China trade blows over rare earths, rattling markets and raising supply chain concerns
China’s move to tighten its grip on rare earth exports—minerals critical to advanced manufacturing and clean technology—has triggered a sharp escalation in trade tensions with the United States, raising concerns for industries dependent on secure supply chains.
According to CNBC, China’s Ministry of Commerce announced that, starting December 1, foreign entities must obtain a licence to export products containing more than 0.1 percent of rare earths sourced from China, or manufactured using Chinese extraction, refining, magnet-making, or recycling technology.
China currently controls about 70 percent of global rare earths supply, minerals essential for high-tech sectors including electric vehicles, defence, and semiconductors.
In response, US President Donald Trump threatened a “massive increase of Tariffs” on Chinese imports and floated additional countermeasures, stating, “there is no way that” China “should be allowed to hold the World ‘captive’” with its rare earths policy.
Trump also signalled the possible cancellation of his meeting with Chinese President Xi Jinping, citing the dispute and describing China’s actions as “very hostile”.
As reported by AP News, China’s Commerce Ministry responded that it “does not want a tariff war but we are not afraid of one,” urging the US to resolve differences through negotiations rather than threats.
The ministry emphasized that export licences would be granted for legitimate civilian uses, but warned that “if the US side obstinately insists on its practice, China will be sure to resolutely take corresponding measures to safeguard its legitimate rights and interests.”
The trade dispute has already had an impact on financial markets.
Reuters noted that the S&P 500 index suffered its steepest weekly decline in months following Trump’s tariff threat, though markets partially recovered as Trump adopted a more conciliatory tone over the weekend, assuring that “it will all be fine” and that the US did not want to “hurt” China.
US Vice President JD Vance, as cited by Bloomberg, framed the situation as a “delicate dance,” asserting that the US holds significant leverage but expressing hope for a reasonable resolution.
He stated, “If they respond in a highly aggressive manner, I guarantee you, the president of the United States has far more cards than the People’s Republic of China… I hope they choose the path of reason.”
The new export controls and tariff threats come at a time when both sides accuse each other of violating the spirit of previous trade truces.
The dispute has implications for global supply chains, particularly for sectors reliant on rare earths for advanced manufacturing and technology.
As the situation develops, the prospect of further escalation or a negotiated settlement remains uncertain, with both governments signalling readiness for either outcome.
