On October 9th, the Chinese Ministry of Commerce and the General Administration of Customs issued seven consecutive announcements, suddenly playing the “strongest rare earth card,” imitating the US Department of Commerce’s “Foreign Direct Product Rules” and “Minimum Content Rules,” and for the first time using extraterritorial jurisdiction rules to comprehensively strengthen export controls on the entire rare earth industry chain.
This indicates that in the eyes of the Chinese Communist Party (CCP), the rare earth issue has evolved from a traditional trade dispute to naked blackmail. However, this approach by the CCP may backfire and end up shooting itself in the foot: lacking bargaining chips may result in the US imposing even more painful new sanctions, injecting strong political will to decouple from the Chinese supply chain for the United States and Europe, and coincidentally providing President Trump with an opportunity to mend the strained relationship with long-term allies due to the tariff war.
The so-called “strongest rare earth card” played by the CCP undoubtedly aims to pressure the US to make significant concessions in terms of tariffs and export controls. During the US-China Madrid meeting in September, Chinese Vice Premier He Lifeng demanded the complete removal of US export controls and tariffs, threatening retaliation.
It is noted that the new regulations by the CCP will be implemented in stages on October 9, November 8, and December 1, allowing room for potential negotiation during this period.
Dai Zhiyan, deputy researcher of the International Economic Department of the China Institute of Economic Research, told Epoch Times that based on past experiences, the CCP treats rare earths as a national security issue rather than from an economic trade perspective. It is clear that the CCP does not see the rare earth card as ineffective; it believes that at least within the foreseeable five years, the US and its allies will not be able to massively mine and refine, giving the CCP resources leverage in negotiations with the US.
Su Ziyun, director of the Institute for Strategic and Resource Studies of the Taiwan Institute for National Security and Defense Research, stated that the first time the CCP weaponized rare earths was during the 2012 Diaoyu Islands conflict with Japan. After the imposition of rare earth export controls, all exports require approval in red-headed documents. Now, as Trump continues the technology blockade against the CCP, Beijing also wants to imitate this approach.
For the US, making concessions on national security technology exports would increase the CCP’s further attempts to blackmail, which is entirely unacceptable for the Trump administration. Before taking more aggressive measures to establish a flexible rare earth supply chain, President Trump will undoubtedly use more powerful bargaining chips to force the CCP to abandon the rare earth card.
One precedent is in early April of this year when the Chinese Ministry of Commerce implemented export controls on seven rare earth elements but quickly compromised under strong counterattacks from the Trump administration.
On the second day the CCP played the “rare earth card” (October 10), President Trump announced that tariffs on goods imported from China to the US would increase by 100% before November 1, and a new export control on “all critical software” would be implemented.
“I don’t want them to play rare earth games with us,” President Trump said on October 19. On October 20, Trump stated that if the US and China could not reach a trade agreement, tariffs on Chinese goods could rise to 155% starting November 1.
On October 22, Reuters revealed that the Trump administration is considering sanctioning plans to restrict the export of goods containing or using US software to China, including everything that can be made utilizing US software, from laptops to jet engines. The fact that such control measures are being considered indicates that the Trump administration is rapidly escalating tensions with the CCP.
Su Ziyun commented that President Trump is not irrational but has more aggressive tactics, particularly useful for dealing with the CCP. “Xi Jinping was manipulated by Trump during the 1.0 period, and now he will be tormented for the second time.”
He pointed out, “For this big bandit, of course, Trump will do whatever it takes technologically and financially to force them to give up some extreme measures. If the CCP is a bit rational, they can understand that the impact of rare earth is only short term. If they persist, the CCP will probably be ready to eat dirt in two years.”
Former US State Department official Chris McGuire stated on the China Talk podcast that this actually highlights the fundamental influence that the US and its allies still have in this area.
“China (CCP) cannot truly act with impunity in this field,” he said. If the US enforces equal licensing requirements for 14nm chips on December 1, but licenses for 14nm or thinner chips are also required – by December 1, these two requirements will likely disappear. This is very similar to the large-scale tariff escalation that never truly took effect.
McGuire also mentioned that the US can further escalate at any time. Will the US impose financial sanctions on banks and the dollar? Yes, we can delve even deeper into the highest points of the chain. However, even if the scope is expanded beyond semiconductors to broader areas, we may still overestimate the pain tolerance of the Chinese (CCP). In fact, it may be more painful than people imagine.
“Remember, the most valuable Chinese company is Tencent, which still relies entirely on US technology. Alibaba also heavily relies on US technology. Major decisions that significantly affect these two major Chinese companies – not to mention all their subsidiaries – will certainly change Xi Jinping’s calculations,” he added.
Some comments suggest that rare earths could be the CCP’s “Achilles’ heel” for dealing with the US and the West. Such assertions are not reasonable and are not factual.
Bloomberg columnist David Fickling pointed out that rare earth mining and processing are not complex technologies. They are not rocket science and do not require the kind of 3-nanometer chip design that can only be achieved with extreme ultraviolet (EUV) lithography – which is a truly “moonshot” innovation requiring decades and hundreds of billions of dollars in research investment. He believes that while the CCP may have a dominant position in rare earth production, this advantage is slight and easily caught up with.
The reason the CCP has been able to monopolize the rare earth industry chain is not due to technical difficulties or secrets, as claimed, but because of CCP policy support and subsidies, whereas the Western rare earth industry is market-driven and lacks such support.
Over the past two decades, the CCP has utilized its global dominance in rare earth refining and processing areas along with subsidies to significantly reduce prices, forcing foreign competitors in the rare earth industry to go bankrupt.
The tumultuous experience of the Mountain Pass mine in California provides a clear example of this.
From the 1990s to the mid-2010s when China became the main rare earth producer, it steadily weakened the competitiveness of the Mountain Pass mine. Just as the Mountain Pass mine faced rising costs, the expansion supported by the CCP pressured prices, leading to its closure in 2002. When Beijing implemented export quotas in 2010 and briefly reduced exports to Japan, prices surged, and Molycorp resumed operations at the mine. However, China’s production resumption, smuggling activities, and the World Trade Organization’s termination of quotas in 2015 resulted in a price crash. Overwhelmed by debts and expensive processing upgrades, Molycorp went bankrupt, and the Mountain Pass lay idle again until 2017 when a new consortium, MP Materials, purchased the mine and resumed operations.
Therefore, the logic of establishing a rare earth supply chain becomes straightforward – whether the government has enough political will. The CCP’s actions happen to fulfill this need.
McGuire mentioned in the podcast that if the US has a genuine, comprehensive, and serious political commitment – supported by Congress and allies – then establishing a rare earth supply chain would likely cost less than the funds allocated to the “CHIPS Act.”
Just to help American farmers required $10 billion. Taking into account some dynamics of the US-China relationship, this money is not too costly in reality. He said, “If this can get us out of the rare earth dilemma, it should be accomplished effortlessly.”
McGuire believes that with robust political impetus, in one to two years at least, some sizable production can be restored.
Peter Harrell, a scholar who assisted in dealing with the rare earth issue during Trump’s first term, expressed a similar view on the X platform: the CCP’s actions are like a strong stimulant, causing all parties – government, capitalists, mining companies, technology ecosystems, and consumers – to start paying attention to the issue and actually deploying the necessary solutions.
“I think the CCP’s influence in this area is overestimated,” he wrote. “With a strong policy environment, I believe we can address the problem faster than the CCP expects. During this transition period, I think Beijing will find that although their export controls are detrimental to Western countries, the effects will be less than they expected.”
Su Ziyun stated that while rare earths have substitutes, chips do not. This is a fundamentally different aspect. Implementing control in such an unequal manner may pose a short-term threat to other countries, but the repercussions will hit Beijing just the same.
“Even if the CCP’s rare earth control is effective now, at most, it will only last around two years,” he said.
During Trump’s first term, to tackle the 2019 COVID-19 pandemic, he launched “Operation Warp Speed,” leveraging various policy levers including procurement safeguards, regulatory simplification, and an all-government commitment, resulting in the first vaccine being rolled out in just nine months, over ten times faster than the normal rate.
The latest report from the Institute for Progressive Policy (IFP) states that the successful model of “Operation Warp Speed” can be applied to the rare earth industry by setting clear, predetermined goals to construct competitive structures and incentivize market-scale production.
The report believes that the success of “Operation Warp Speed” hinges on four conditions: the government should continue deploying robust tools such as equity investments, loans, purchasing guarantees, and price insurance mechanisms to provide funding for multiple competitive companies; cooperate with international partners to build a resilient supply chain outside of China; relax environmental protection terms within the US Congress; and commit to negotiating minimal restrictions on US technologies for national security concerns.
On October 15, US Treasury Secretary Scott Bessent explicitly told CNBC that the Trump administration will take measures similar to “Operation Warp Speed” to accelerate US rare earth processing.
Bessent stated that the US must compete with non-market economies like the CCP by utilizing industrial policies. Specific measures include setting a price floor across a range of industries, acquiring more company equity to combat the CCP’s market manipulation.
An agreement reached between MP Materials and the US Department of Defense regarding light rare earths resolves the price disparity issue by providing a guaranteed price floor to MP, addressing market concerns.
The Pentagon guarantees that over the next ten years, the minimum price for neodymium praseodymium oxide stored or sold by MP Materials is $110 per kilogram. If the market price falls below $110 per kilogram, the US will pay the difference to MP Materials quarterly.
The CCP believes that “rare earths” could become a geopolitical weapon equivalent to US and European countries controlling the semiconductor supply chain, but this idea is notably a severe misjudgment.
Most importantly, excessive use of the rare earth card by the CCP has changed everyone’s mindset, significantly strengthening the Western view of the CCP as untrustworthy.
Yao Yuan, a professor at St. Thomas University International Studies, told Epoch Times that China is an export-oriented economy. If skepticism arises regarding its rare earth supply chain, this doubt, once firmly rooted, could actually lead to the CCP suffering to some extent; many countries are gradually detaching from China’s industrial chain.
The CCP’s approach may backfire and end up shooting itself in the foot, coincidentally providing President Trump with an opportunity to mend the strained relationship with long-term allies due to the tariff war.
Wang He, a China expert, told Epoch Times that the rare earth control measures released by the CCP were intentional to catch the Western countries off guard, a typical rogue approach. The CCP claims they notified the West beforehand, but the US Trade Representative publicly denied the claim, stating they only communicated after seeing the public news, but the CCP refused to respond and ignored calls.
“This is actually a reckless move,” he said, promoting unity across the West. If not for the CCP’s strong reactions, the West might not have been able to establish a concrete determination to build a global rare earth supply chain independent of the CCP.
At the annual Global Economic Leaders Conference in Washington DC, how to respond to the CCP’s new export control measures on the rare earth supply chain became a major topic of discussion.
On October 15, US Treasury Secretary Scott Bessent stated that the Trump administration is “in discussions with US allies, including the EU, Australia, Canada, India, and Asian democratic countries” to deliver a comprehensive response to the CCP.
The EU’s Trade Commissioner publicly accused Beijing of weaponizing its control over rare earths and urged the EU and the G7 nations to take unified action against these restrictive measures.
Australia is attempting to address the supply dilemma of Western allies with its abundant mineral resources. Australian Ambassador to the US Kevin Rudd emphasized that the US has gaps in 50 designated critical minerals and rare earths, and with both sides’ financial input, Australia “can meet the demand for 30 to 40 of these, especially in rare earth processing, without too much extra effort.”
Su Ziyun stated that the CCP’s only card is this one, resulting in desperate moves that can have significant side effects. However, by issuing a blanket ban on exports, it forces other countries into action, essentially turning into 108 heroes versus Beijing showdown.
Yao Yuan expressed that the CCP’s rare earth export control not only affects the US but also countries such as Japan, Canada, or G7 European countries, all to some extent. The industrial chains of these G7 countries are interconnected, and the rare earth control by the CCP will, in fact, affect the interconnected supply chains of all industries related to G7 countries. Thus, there will definitely be a reaction.
He said the biggest problem for the CCP is that they lack something Western countries would be willing to negotiate over. The only card they have left is the Chinese domestic market, but because the economy is not open, these countries have nothing to negotiate with it.
In fact, the CCP does not have as much confidence to confront the West as people think. Yao Yuan said, of course, the Chinese people have no choice. Nevertheless, the Chinese people should put some pressure on the Communist Party to a certain extent.
Overall, the CCP’s recent rare earth export control measures have sparked significant political and economic implications, leading to both challenges and opportunities for the United States and its allies in navigating the complex dynamics of international relations.