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| The U.S.–China trade conflict intensifies over rare earth exports and tech supremacy.(Representing AI image) |
Trade War Reignites: Trump’s 100% Tariff Threat, China’s Rare Earth Retaliation & Global Implications
- Dr.Sanjaykumar pawar
Table of Contents
- Introduction: A New Phase in the US–China Trade Duel
- The Strategic Role of Rare Earths in Modern Economies
- 2.1 What Are Rare Earth Elements?
- 2.2 China’s Dominance in the Rare Earth Value Chain
- Trigger Point: China’s Export Controls vs. U.S. Tariff Escalation
- 3.1 China’s April 2025 Export Controls
- 3.2 Trump’s 100% Tariff Announcement
- 3.3 Interplay of Export and Import Controls
- Economic & Industrial Impacts
- 4.1 On the U.S.: Technology, Manufacturing & Defense
- 4.2 On China: Export Shock, Stimulus & Currency Responses
- 4.3 Global Ripple Effects: Supply Chains, Inflation, Trade Diversification
- Modeling the Disruption: Trade Risk, Chains & Resilience
- 5.1 Systemic Trade Risk in REE‑Intensive Chains (Klimek et al.)
- 5.2 Supply Chain Reallocation Amid Triple Crises (Luo et al.)
- Strategic Stakes & Geopolitical Chess
- 6.1 Hard Leverage vs Soft Diplomacy
- 6.2 The Military-Industrial Dimension
- 6.3 Third‑Party Actors & Supply Chain Alternatives
- Insights, Scenarios & Policy Options
- 7.1 Possible Scenarios: De‑escalation, Tit‑for‑Tat, Entrenchment
- 7.2 Long-Term Strategy: Domestic REE Capacity & Allies
- 7.3 Risks & Uncertainties
- Conclusion
- Frequently Asked Questions
- References & Further Reading
1. Introduction: A New Phase in the US–China Trade Duel
The global trade landscape was shaken on October 10, 2025, when former U.S. President Donald Trump announced a sweeping 100% tariff on all Chinese imports, set to take effect on November 1—or even sooner. This bold move came in direct retaliation to China’s decision to restrict exports of rare earth elements, a vital group of minerals used in everything from smartphones to fighter jets.
Unlike earlier rounds of the U.S.–China trade war, which focused mainly on manufactured goods, this escalation dives deep into the tech and raw material supply chains. At the center of this storm are rare earth elements, where China controls over 80% of global processing capacity. These minerals are essential for cutting-edge sectors like semiconductors, electric vehicles (EVs), aerospace, and defense.
This isn’t just about tariffs anymore—it’s about who controls the building blocks of modern technology. As supply chains get weaponized and geopolitical stakes rise, the world may be entering a new era of resource nationalism and strategic decoupling.
In this blog, we break down what this latest move means, why it’s happening now, and how it could reshape global trade, industry, and power dynamics for years to come.
2. The Strategic Role of Rare Earths in Modern Economies
2.1 What Are Rare Earth Elements?
Rare earth elements (REEs) are a group of 17 metallic elements, including familiar names like neodymium, lanthanum, and yttrium, that play an invisible yet crucial role in the technologies we rely on every day. From smartphones and electric vehicles to wind turbines, fighter jets, satellites, and laser-guided weapons, rare earths are the silent enablers of modern life and advanced defense systems.
Despite the name, these elements aren’t actually “rare” in terms of abundance in the Earth's crust. The challenge lies in how they occur—they're scattered in low concentrations and are often difficult, expensive, and environmentally damaging to mine and process. That’s what makes them strategically important and, increasingly, a flashpoint in global trade.
What truly sets rare earths apart isn’t just mining—but refining and separation, a complex chemical process that only a few countries, particularly China, have mastered at scale. While nations like the U.S., Australia, and India have raw deposits, they lack the infrastructure to process and manufacture high-performance components like rare earth magnets, essential for electric motors and military hardware.
In today’s world, control over rare earths equals leverage—technological, economic, and geopolitical. And right now, China dominates the game.
2.2 China’s Dominance in the Rare Earth Value Chain
When it comes to rare earth elements, China isn’t just a major player—it’s the undisputed global leader. The country currently accounts for nearly 70% of the world’s rare earth ore extraction and controls a staggering 85–90% of global refining and separation capacity. But China’s grip extends even further down the supply chain.
It also leads in the production of high-performance magnets, crucial for electric vehicles (EVs), wind turbines, defense systems, and advanced electronics. Some estimates suggest that over 90% of the world's supply of these permanent magnets comes from Chinese manufacturers.
This vertical integration gives China more than just economic power—it grants geopolitical leverage. Unlike other resource-rich countries that simply export raw materials, China controls every stage, from mining to final manufacturing. That means it can tighten or loosen exports, impose licensing restrictions, and influence prices to suit its strategic goals.
China has long used this dominance to influence global markets, often combining state subsidies, lax environmental laws, and export incentives to maintain its lead. With rare earths powering both civilian tech and military hardware, this control represents a critical choke point in the global tech economy—and a growing concern for Western governments.
3. Trigger Point: China’s Export Controls vs. U.S. Tariff Escalation
3.1 China’s April 2025 Export Controls
In April 2025, China took a bold and strategic step in the intensifying U.S.–China trade standoff by placing seven rare earth elements—including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—under its export control regime. These elements are critical for advanced technologies like missile systems, electric motors, lasers, and medical devices, many of which have dual-use applications in both civilian and military sectors.
Under the new rules, Chinese exporters must now obtain government-issued licenses to ship these elements or their derivatives abroad. The official reason? To "safeguard national security." But analysts widely interpret this move as a calculated response to ongoing U.S. tariff escalations, especially after former President Trump’s earlier trade threats.
The impact was swift. Chinese customs data revealed that in April alone, rare earth exports to the U.S. fell by approximately 37%, while shipments of rare earth magnets—used in everything from EVs to drones—plunged by 58%.
While not without precedent—China restricted rare earth exports to Japan in 2010—the scope, timing, and strategic targeting of this 2025 action marks a significant escalation. It signals that China is willing to weaponize its rare earth dominance in this new phase of economic warfare.
3.2 Trump’s 100% Tariff Announcement
In a dramatic escalation of U.S.–China trade tensions, former President Donald Trump announced in October 2025 a sweeping 100% tariff on all Chinese imports—on top of existing duties. Framed as retaliation for China’s rare earth export restrictions, Trump called Beijing’s move both “shocking” and “hostile,” accusing China of attempting to hold the world "captive" by weaponizing critical minerals.
But the announcement went beyond tariffs. Trump also hinted at upcoming U.S. export controls on critical software technologies, potentially restricting the flow of advanced U.S. tools used in semiconductors, AI, and defense applications to Chinese firms. This signals a broader strategy to choke off China’s access to key tech inputs.
Financial markets felt the shock instantly. The Nasdaq tumbled 2–3%, with other major indexes following suit, reflecting investor anxiety over renewed trade instability and tech decoupling.
Perhaps most revealing was the timing: the tariff is set to take effect “November 1, or sooner,” a vague deadline that gives Washington maximum leverage and keeps Beijing guessing. The move reintroduces unpredictability into global trade policy—something that defined Trump’s earlier presidency—and signals that the U.S.–China trade war is not just back, but potentially entering its most volatile phase yet.
3.3 Interplay of Export and Import Controls
The current U.S.–China trade clash has evolved far beyond traditional tariffs on finished goods. What we’re witnessing now is a high-stakes strategic chess match, where both nations are deploying dual instruments of economic power: export controls and import restrictions.
On one side, China is tightening export controls on rare earth elements and high-performance magnets—materials that are essential to global tech, energy, and defense sectors. These are not just commodities; they’re the upstream enablers of modern innovation. On the other side, the U.S. is responding with aggressive import tariffs, including Trump’s proposed 100% duty on all Chinese goods, while also hinting at new export bans on sensitive software and semiconductor technologies.
This two-way pressure is squeezing global businesses caught in the middle. Companies now face a mix of licensing hurdles, volatile pricing, and supply chain uncertainty, especially in sectors like EVs, aerospace, defense, and clean energy.
The shift is clear: this is no longer about cheap goods and trade deficits. It’s about who controls the inputs that power the 21st-century economy—from raw materials to code. As both superpowers weaponize their choke-points, the rest of the world must brace for long-term disruption and geopolitical realignment.
4. Economic & Industrial Impacts
4.1 On the U.S.: Technology, Manufacturing & Defense
The latest phase of the U.S.–China trade conflict is sending shockwaves through America’s most vital industries. From tech to defense, the U.S. faces mounting pressure due to its deep reliance on Chinese rare earth elements (REEs)—especially at the midstream stage, where refining and component manufacturing happens.
(a) Technology & Electronics Sector
U.S. tech companies are especially vulnerable. Rare-earth magnets, essential for electric motors, memory storage, sensors, and displays, are foundational to everything from smartphones and EVs to wind turbines. As China tightens exports, hardware supply chains face disruption and rising costs. This ripple effect hits sectors like renewable energy, consumer electronics, and even semiconductors.
Experts warn that China’s dominance in refining, not just raw extraction, allows it to apply pressure precisely where the U.S. is weakest—rendering chip bans alone insufficient to contain China’s influence.
(b) Defense & Aerospace
The U.S. defense sector is even more exposed. Dysprosium and other rare earths are critical for high-performance jet engines, missile guidance, and stealth coatings. The Center for Strategic and International Studies (CSIS) has flagged rare earth access as a national security risk, warning of disruptions in defense manufacturing pipelines.
(c) Inflation & Consumer Impact
Higher tariffs and supply shocks will inevitably push prices up. Electronics, appliances, and electric vehicles could become more expensive as companies pass costs to consumers or face compressed margins. Inflationary pressure from these inputs could extend across the economy.
(d) Industrial & Supply Chain Dislocation
Rebuilding domestic or allied supply chains is costly and slow. A study by Klimek et al. shows the real choke-points aren’t raw ores, but midstream products like magnets and ceramics—areas where U.S. industry has little current capacity. These are the hardest disruptions to replace or absorb.
4.2 On China: Export Shock, Stimulus & Currency Responses
As the U.S. doubles down on tariffs and tech restrictions, China faces mounting economic headwinds, especially in its export-driven sectors. While Beijing holds considerable leverage over rare earths, it must now navigate serious risks to growth, currency stability, and domestic economic confidence.
(a) Export Decline & Growth Drag
With a potential collapse in U.S. demand, China could see a sharp fall in export volumes. The Economist Intelligence Unit (EIU) estimates U.S. import volumes from China could drop by 40 percentage points over the next year if the 100% tariffs hold.
The economic impact would be sizable: EIU forecasts suggest a cumulative GDP drag of ~2.5 percentage points between 2025 and 2027, driven largely by weaker trade flows, manufacturing slowdowns, and reduced global demand for Chinese goods.
(b) Policy Response & Stimulus
To offset the blow, China is expected to roll out large-scale stimulus measures. According to Goldman Sachs, Beijing may inject as much as 6 trillion RMB in net fiscal spending in 2025. This would include infrastructure investments, liquidity injections, and cuts to the reserve requirement ratio (RRR) for banks.
However, Goldman also warns that even aggressive easing may not fully offset the external demand shock—especially if tariffs are long-lasting or global supply chains shift permanently.
(c) Currency & Capital Controls
In anticipation of capital flight and investor anxiety, China may permit a managed depreciation of the renminbi (RMB). The EIU predicts a short-term slide to RMB 8/USD, with stabilization expected around 7.7–7.8.
To cushion the impact, Beijing may reinforce capital controls, restrict outbound investments, or even use state-owned banks to intervene in currency markets.
4.3 Global Ripple Effects: Supply Chains, Inflation, Trade Diversification
The escalating U.S.–China trade tensions and rare earth export restrictions don’t just impact the two giants—they send shockwaves through global supply chains, inflation rates, and trade dynamics worldwide.
(a) Supply Chain Reallocation Beyond China
In response to growing risks, many companies are adopting a “China + 1” or “China + N” strategy—diversifying their supply bases to reduce dependency on any single country. Research by Luo et al. shows that while firms have shifted some lower-tier manufacturing to countries like ASEAN members, India, and Mexico, the critical upstream and midstream rare earth supply chain remains heavily anchored in China’s control.
This means that even as factories move, key bottlenecks in refining and component production, especially for rare earth magnets and ceramics, continue to expose global industries to Chinese leverage.
(b) Third-Party Pressures & Alliances
Countries rich in rare earth resources or manufacturing capacity, such as Australia, Brazil, Vietnam, and India, are emerging as pivotal players. Investments in alternative rare earth projects, like Lynas Corporation’s mining in Australia and increased recycling efforts, are gathering momentum.
However, these countries face increasing geopolitical pressure from both the U.S. and China, each seeking preferential access or imposing restrictions. The strategic alignment of these nations will shape the future flow of critical materials and technological supply chains.
(c) Inflation & Trade Slowdown
Rising costs for rare earths, batteries, motors, and defense equipment could intensify global commodity inflation. Supply bottlenecks may drive up prices for finished goods, especially in electronics and green technologies.
Additionally, heightened uncertainty and risk premiums threaten to slow global trade and investment, with protectionist tendencies gaining ground worldwide—further complicating an already fragile economic landscape.
5. Modeling the Disruption: Trade Risk, Chains & Resilience
5.1 Systemic Trade Risk in REE‑Intensive Chains (Klimek et al.)
In “Systemic Trade Risk Suppresses Comparative Advantage in Rare Earth Dependent Industries”, Klimek et al. (2025) develop an AI‑augmented input-output network over 168 rare-earth–related codes.
Key takeaways:
- Dependencies and supplier concentration are highest in intermediate input products, not raw ores—i.e. magnets, ceramics, catalysts are more fragile.
- China occupies the “low risk, high influence” cluster; the U.S. and EU are structurally vulnerable at midstream.
- High exposure in intermediate products correlates with weak ability to develop competitive advantage due to choke‑point risks.
- Mitigation must go beyond raw material access; countries must attack bottlenecks in processing, separation, and magnet fabrication.
This underscores that China’s leverage lies exactly where many advanced industries depend.
5.2 Supply Chain Reallocation Amid Triple Crises (Luo et al.)
In “Global Supply Chain Reallocation and Shift under Triple Crises: A U.S.-China Perspective”, Luo, Kang & Di examine how COVID‑19, Russia–Ukraine, and trade tensions jointly pressured global value chains (GVCs).
Findings:
- Although firms tried to diversify, many new supply chains remained deeply embedded in Chinese upstream networks—meaning “alternate sourcing” often still calls on China.
- U.S. imports increasingly routed through ASEAN, but functional positioning still linked to Chinese intermediates.
- The reallocation is constrained by complexity, economies of scale, sunk investments, and institutional inertia.
Thus, even when companies shift suppliers, absolute decoupling is harder than it looks.
6. Strategic Stakes & Geopolitical Chess
6.1 Hard Leverage vs Soft Diplomacy
China’s move is strategic: not a blanket embargo, but a calibrated export licensing regime that allows political signaling.
- It allows Beijing flexibility to grant or withhold licenses depending on negotiations.
- It mirrors Western export controls (e.g., U.S. on advanced semiconductors) as a rhetorical counter.
- Retaliation through rare earths is less publicly visible but arguably more potent than overt tariffs.
At the same time, the U.S. can use trade diplomacy, allies, multilateral forums (WTO disputes) to counterbalance.
6.2 The Military‑Industrial Dimension
Because many rare earth-linked components have dual-use or purely defense utility, control over them becomes a core aspect of strategic competition.
China’s ability to limit dysprosium, terbium, etc., may undermine U.S. high-end military production pipelines (e.g. F‑35s, guided missiles).
This confronts the U.S. with a hard choice: accelerate its rare earth infrastructure, rely on allies, or accept vulnerability in defense procurement.
6.3 Third‑Party Actors & Supply Chain Alternatives
Several dynamics could reshape alliances and sourcing:
- Australia, India, Brazil, Vietnam, Canada: potential new nodes for raw & rare earth projects.
- Recycling & circular economy platforms: extracting rare earths from used electronics or magnets.
- Technology alliances (e.g. U.S.-Japan-Taiwan) coordinating to break Chinese midstream choke-points.
- Countries between U.S. and China may be pressured to choose sides or limit exports.
The contest is now as much about which countries control the new industrial backbone as about tariffs per se.
7. Insights, Scenarios & Policy Options
7.1 Possible Scenarios
| Scenario | Description | Likelihood & Risks |
|---|---|---|
| De‑escalation & Negotiation | U.S. delays or scales back tariffs in exchange for China loosening REE controls | Moderate — both sides may prefer to avoid full-blown confrontation, but trust is low |
| Tit‑for‑Tat Entrenchment | Escalatory spiral: U.S. raises tariffs, China further restricts, both sides dig in | High risk — duration uncertain, high economic cost |
| Selective Compliance / Licensing Regime | China grants licenses selectively for critical sectors; U.S. imposes waivers or carve-outs | Possible middle ground, though high administrative complexity |
| Global Decoupling / Bloc Formation | U.S & allies build independent rare earth-technology blocks; China forms a parallel bloc | Long-term paradigm shift; high capital cost, geopolitical tension |
7.2 Long-Term Strategy: Domestic REE Capacity & Allies
- Scale U.S. domestic rare earth mining & refining: but environmental and cost hurdles exist.
- Foster midstream fabrication (magnets, separation) via subsidies, public-private partnerships.
- Pivot to allied sources & supply chain realignment (Australia, India, recycling).
- Invest in R&D for alternative materials—to reduce reliance on certain critical REEs.
- Leverage multilateral enforcement (WTO, supply chain pacts) to punish misuse of export controls.
7.3 Risks & Uncertainties
- Timing and enforcement uncertainty: It’s unclear how strictly China or the U.S. will enforce controls or where licenses will be granted or denied.
- Supply chain lag & sunk cost: Transitioning away from China-dominant pathways takes years and investment.
- Retaliatory escalation: Beyond trade, China or U.S. may resort to sanctions, data restrictions, or currency moves.
- Global backlash: Developing nations, multinational firms may resist forced alignment; trade fragmentation could slow growth.
8. Conclusion
The October 2025 announcement of a 100% additional U.S. tariff on Chinese goods, triggered by China’s tightened rare earth export controls, marks a pivotal moment in the evolving U.S.–China strategic competition. What began in manufactured goods and tariffs has now ascended into the heart of the industrial value chain—where rare earths, magnets, and semiconductors live.
China’s ability to pull export levers gives it asymmetric influence over sectors critical to defense, clean energy, and high-tech growth. The U.S. faces immediate exposure, and globally, supply chains may fracture further. Yet new economic studies remind us: midstream choke-points (processing, magnet fabrication) are the real battleground, and structural dominance there is harder to overturn than raw-material control.
This confrontation generates hard choices: will countries double down on decoupling? Will new alliances or blocs emerge? Is there time for diplomacy before cascading disruption? What is clear is that the fight for materials may define the technological and strategic order of the coming decade.
9. Frequently Asked Questions (FAQ)
Q1: Are these tariffs already in effect, or is November 1 a soft deadline?
Trump indicated November 1 as the potential start, but he allowed flexibility ("or sooner") depending on China’s response.
Q2: Which Chinese goods will be affected?
The announcement is sweeping—applying on top of existing tariffs. Likely to hit electronics, machinery, components, consumer goods—especially those with rare earth content or tech adjacency.
Q3: Will China escalate further with retaliatory tariffs?
Possible. But China may prefer calibrated export control tools over blunt tariffs, especially given its dependence on external demand and potential WTO constraints.
Q4: Can the U.S. immediately build domestic rare earth capacity?
Not overnight. Building mining, refining, separation, and magnet fabrication is capital-intensive, environmentally challenging, and requires decades of investment and regulatory alignment.
Q5: Could this escalate into techno‑war beyond trade?
Yes. We may see software controls, data rules, sanctions, IP barriers—all reinforcing economic bifurcation.
10. References & Further Reading
- Chatham House – “China’s Rare‑Earth Export Restrictions Threaten Washington’s Military Primacy” (analysis)
- Al Jazeera – “Why China’s rare earth exports are a key issue”
- CSIS / The Guardian – China’s controls and U.S. defense implications
- Foreign Affairs Forum – Structural control of rare earth chain
- Times of India – Chinese mineral export limits
- Business Standard – Export controls endangering trade truce
- CNBC – Rare earths as China’s bargaining chip
- Goldman Sachs – China’s mitigation strategy
- Economist Intelligence Unit – Tariff impacts on China
- Klimek et al. (2025) – “Systemic Trade Risk Suppresses Comparative Advantage in Rare Earth Dependent Industries”
- Luo et al. (2025) – “Global Supply Chain Reallocation Under Triple Crises”
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