China’s Rare-Earths Are a Strategic Weapon — And This May Be Just The Beginning

President Trump called his Oct. 30 meeting with President Xi Jinping "a 12." That colorful assessment, however, masked a more consequential reality revealed in the run-up to the summit: Beijing’s near-monopoly on rare earth minerals has become a powerful geopolitical lever.

In October, China announced export controls intended to restrict foreign access to its rare earths — a bold move that surprised industry leaders and shifted the negotiating balance ahead of the talks. The timing made clear that control over critical supplies was now a central tool in Beijing’s strategic playbook.

Why Rare Earths Matter

China accounts for roughly 61% of global rare-earth production and more than 90% of downstream processing. These materials — and the permanent magnets, alloys and components made from them — are essential for modern defense systems, missiles, electric vehicles, consumer electronics and advanced medical equipment. If Beijing enforces its controls, key segments of the global industrial base could face severe disruption.

Short-Term Diplomacy, Long-Term Risk

U.S. leaders and multinational companies reacted with alarm. As one senior U.S. official put it, the move pointed a figurative "bazooka" at global supply chains. That pressure helped produce rapid diplomacy: China agreed to resume some agricultural purchases and to take limited steps on precursor chemicals, and Washington won a temporary postponement of the new export measures.

But the outcome was a pause rather than a structural fix. Several concessions exchanged in the talks — reduced tariffs, a suspension of reciprocal port fee increases and new channels for chip purchases — arguably returned both sides closer to the status quo ante, while underscoring Beijing’s ability to extract leverage.

Can the U.S. End Its Dependence Quickly?

Days after the summit, the U.S. administration outlined an ambitious plan to break dependence on Chinese rare earths within 18 months, including coordinated efforts with allies, expedited permits and equity stakes in mining ventures. That timeline is widely viewed as unrealistic. China built its rare-earth ecosystem over decades — as Deng Xiaoping once noted, "The Middle East has oil; China has rare earths." Reconstituting a secure, end-to-end supply chain would require many years, extensive investment, and sustained political will to train skilled workers, develop downstream processing capacity and address environmental and regulatory challenges.

Broader Implications

Rare earths may be the most visible example of Beijing’s willingness to use economic leverage, but they are unlikely to be the last. China also holds dominant positions in other critical supply chains — including certain pharmaceuticals and advanced materials — that could be used as bargaining chips in future confrontations.

The strategic lesson for Washington is clear: containment alone is insufficient. Policymakers must combine near-term mitigation (stockpiles, allied coordination, diversification) with a long-term industrial strategy to rebuild resilient supply chains while weighing environmental and social costs.

Stanley Chao is the author of Selling to China and managing director of All In Consulting, which advises Western companies on business and manufacturing strategies in Asia and China.