China Imposes New Export Controls on Rare Earths, Prompting US Tariff Threat
Beijing announced today that starting December 1st, a license will be required for foreign companies exporting products containing more than 0.1% of rare earths from China, or those produced using Chinese production technology, escalating trade tensions with the United States.
The move prompted an immediate response from former President Donald Trump, who yesterday announced a proposed 100% tariff on all Chinese goods and limitations on U.S. software exports to China. Experts warn this could further disrupt global supply chains and increase costs for consumers. Dean Ball, a former senior advisor in the White House Office of Science and Technology Policy, cautioned that China’s policy “gives it the power to forbid any country on Earth from participating in the modern economy,” noting China’s dominance in rare earth production – controlling over 90% of the world’s processed supply and rare earth magnets – was built through deliberate industrial investment.
These critical materials are essential components in a wide range of industries, including technology, automotive manufacturing, and defense. Recent rare earth shortages have already led to production cuts at U.S. auto companies as China has previously leveraged supply to counter tariffs. Michael Froman, president of the Council on Foreign Relations and a former U.S. Trade Representative, highlighted the reciprocal nature of the conflict, stating, “In other words, the United States can cut China off from the chips of today, but China can make it vastly harder to build the chips and other advanced technologies of tomorrow.” You can learn more about the importance of rare earth elements at the U.S. Geological Survey website.
While some analysts, like economist Robin Brooks of the Brookings Institution, believe China’s exporters are already suffering from existing tariffs and may be escalating the situation to force a reduction, Beijing maintains the export controls are a sovereign right and not a ban. Ball suggested the situation presents an opportunity to build a more resilient global supply chain, stating, “Always remember that supply is elastic…If our lives depend on it, we can surmount many challenges.” For further context on the US-China trade relationship, see the Council on Foreign Relations’ China page.
China’s commerce ministry stated Sunday that while it does not desire a tariff war, it is also not afraid of one, and will continue to assess the situation.
