Strategic leverage: Trade war enters rare earths phase

In Beijing’s version of the trade war, the United States is the bully and China is the victim — a rising power trying to protect the global economy while Washington unfairly hurls tariffs and technology bans its way.

That narrative is becoming increasingly difficult to reconcile with the image emerging in recent days: China as an industrial juggernaut, poised to utilise its control over minerals essential to modern manufacturing against any country or company that stands in its way.

China mines and processes much of the world’s rare earths, needed for computer chips, electric vehicles and fighter jets. In retaliation against President Donald Trump’s tariffs and technology restrictions, Beijing has introduced a system that would control the trade of a huge swath of tech products worldwide that contain trace amounts of Chinese rare earths.

The move gives Beijing leverage ahead of a meeting between Trump and Chinese leader Xi Jinping — a reminder that China’s grip on these minerals can shape the terms of any trade truce.

Still, the show of economic muscle could backfire. Beijing has long condemned American export controls — a strategy it now appears to be mimicking. By weaponising rare earths and restricting access to favoured countries, China risks looking like the irresponsible hegemon it accuses the United States of being.

“China’s walking a fine line between strengthening its position in trade negotiations and scaring the rest of the world about its export control intentions,” said Neil Thomas of the Asia Society Policy Institute.

China has pressed Washington to drop export restrictions on semiconductor chips, lower tariffs, and remove barriers to Chinese investment. Trump, in turn, has threatened an additional 100% tariff on Chinese products and new export curbs on U.S. software.

Analysts believe both sides could seek to stabilise ties and suspend their most punitive measures — pausing U.S. tariffs and tech restrictions and delaying Chinese controls on rare earths.

Under the new Chinese rules, exporters would need approval from Beijing to sell components containing Chinese rare earths or made with Chinese equipment. Officials claim the rules prevent the minerals from being used for weapons, but they also give Beijing discretion to tighten or loosen approvals for political reasons.

“If bilateral relations are bad, applications may take a long time — or be rejected,” said Wu Xinbo, dean at Fudan University in Shanghai.

China argues it is simply mirroring American extraterritorial controls, such as those used to block exports to Chinese tech giant Huawei.

“We basically followed the precedent set up by the U.S. and its allies,” Wu said. “If you want to say this is coercive, fine — we just learned from you.”

That stance may undercut China’s efforts to present itself as a reliable trading partner and a defender of globalisation. As international backlash grows, Chinese officials have tried to soften the message, saying the new measures are not export bans.

Vice Commerce Minister Ling Ji met Monday with representatives from more than 170 foreign companies, assuring them that China would continue approving “legitimate” transactions and maintain supply stability.

Still, experts doubt Beijing will retreat. China has been refining its export control tools since at least 2017.

“The gun is loaded,” said Rush Doshi, a former Biden administration official. “The question now is what issue they’ll pull the trigger on.” He added that Beijing could use the controls not just in economic disputes but to strengthen its hand on political issues such as Taiwan.

Applying the rule globally, not just toward the United States, may be an effort to deter countries from reducing reliance on Chinese supply chains — a strategy known as “de-risking.”

“They knew there’d be blowback,” said Emily Kilcrease of the Centre for a New American Security. “But they wanted to show strength — to show anyone aligning with the U.S. or pursuing de-risking that it won’t be costless.”

With this move, Beijing is both challenging U.S. dominance and revealing its own contradictions. It casts itself as a victim of Western coercion even as it flexes its market power in ways that echo the very tactics it condemns.

Whether China’s gamble succeeds may depend less on Trump’s response than on how the rest of the world views Beijing: as a protector of global trade, or a new kind of bully.