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China, which successfully narrated its global supply chain by halting the flow of rare earths, has put pressure on Washington and clarified Beijing’s power to weaponize export restrictions on a wider range of important commodities, says analysts and businessmen.
China controls the major mineral supply chain, and its Commerce Ministry began requesting licenses for exporting rare earths and related magnets in early April. The slow approval process has shaken up the global supply chain, and Beijing has given the US leverage after Donald Trump’s sweeping “liberation day” tariffs.
He hopes more licenses will be issued after President Trump and Chinese President Xi Jinping spoke on Thursday, paving the way for a new round of trade talks in London on Monday. On Saturday, Beijing showed a rapid approval process for some European companies.
However, XI’s recent rollout of export controls has brought the balance of US-China trade talks back to Beijing, experts said.
Andrew Gilholm, head of China analysis at Consultancy Control Risks, said export controls have helped Xi’s administration oppose pressure not only from the US but also from Washington to gain more difficult boundaries in China.
“The simple truth is that we don’t have much precedent for this. Export control is a dream tool in Beijing. They can be fine-tuned, tightened, loosened, applied to all countries or one country,” Gilholm said.
China’s Foreign Ministry on Saturday confirmed that Lifeng will travel to the UK for talks this week. Trump has sent Treasury Secretary Scott Bescent, Commerce Secretary of Commerce Howard Rutnik and US Trade Representative Jamie Songlia in the first round of negotiations since the 90-day trade ceasefire was hit on May 12th.
The dangers of the US and the EU are both trapped in a trade war with China — the leverage that Beijing discovered in rare earth export restrictions can also be replicated in other areas of the high-tech supply chain, analysts said.
Analysis from Beijing consultant Trivium shows that if Beijing could limit the flow of materials such as chips, magnesium and light rare earths, such as the deadline for further tightening of chip control by the US, it could limit the flow of materials such as Beijing’s escalation.
China also controls the production of new super-strong magnets, stronger transistors, dense batteries, new chips and software, Arthur Clover’s research director said in a note to clients. He also cited “a horrifying ecosystem of overlapping industries” across electric and self-driving vehicles, drones, robots, sensors, smartphones, and “and semiconductors, batteries, AI that power them.”
“The fact that the Trump team is just beginning to recognize it is changing the balance of leverage quickly,” he added.
According to a flash survey by the US Chamber of Commerce in China, the lobby group, Lobby Group, has highlighted that many factories have been closed as more than three-quarters of businesses affected by rare earth control in late May had three months of stockpile.
The European Chamber of Commerce said the number of export approvals that have recently been seen as the most urgent “to avoid a major crisis.” However, block companies struggled with the licensing process, both in terms of delays and lack of transparency.
It is unclear whether Beijing was intended to target Europe, but once the shortage became clear, it could have cleared the backlog, one businessman said.
The slow approval of the export license has already led to a series of urgent bilateral negotiations in Beijing, with China giving greater leverage in other competitive areas. Rare earths have been directly grown in Beijing in recent weeks by South Korea, Japan and several EU member states, according to people familiar with the issue.
China’s approach is “purely trade,” a western diplomat, familiar with negotiations, added that “they want to divide and conquer.”
Beijing argues that the use of export controls is in line with international practices of products that can be used in both military and civilian applications. The US has also imposed restrictions on the sale of semiconductors and chip-making equipment to China.
The Commerce Department did not immediately answer questions on Saturday.
The threat of being blocked from rare earths and magnets made in China has strengthened our resolve to reduce China’s dependence on industrial supply chains.
Ilaria Mazzocco, an industrial policy expert at the Center for Strategic and International Studies, a Washington think tank, hopes that the government will begin to build larger resource stockpiles and more funds will be available to develop alternatives to help develop alternatives.
Tom Nunlist, associate director of Shanghai-based Trivium, said current export controls are “very effective” and could last, given that “opening the mine and setting up refinement operations overnight.”
“China first needs to understand how to exercise more accurately the considerable firepower they already have.”
