China has found Trump’s pain point

Last week, the Chinese Ministry of Commerce published a document called “Declaration No. 62 of 2025.”

But this was not just a bureaucratic message. I was shaken The fragile tariff truce with the United States.

The announcement outlined sweeping new restrictions on its exports of rare earth elements, in a move that tightens Beijing’s grip on global supplies of vital minerals – and reminded Donald Trump how much leverage China has in the trade war.

China has a near monopoly in processing rare earth elements, which are essential for the production of everything from smartphones to fighter jets.

under New rulesForeign companies now need Chinese government approval to export products containing even a trace amount of rare earth elements, and must declare their intended use.

In response, US President Donald Trump He threatened to impose additional customs duties of 100%. on Chinese goods and placing export controls on key programmes.

US Treasury Secretary Scott Besent said: “This is China versus the world. They have pointed a bazooka at the supply chains and industrial base of the entire free world, and we won’t be able to.”

China said on Thursday that the United States had “deliberately created unnecessary misunderstanding and panic” over restrictions on rare earth elements.

A Ministry of Commerce spokesperson added: “Provided that export license applications are compliant and intended for civilian use, they will be approved.”

This week, the world’s two largest economies also imposed new port duties on each other’s ships.

The escalation of the trade war ends months of relative calm after senior US and Chinese officials brokered a truce in May.

Trump and Chinese President Xi Jinping are expected to meet later this month, and experts told the BBC that restrictions on rare earths would give China the upper hand.

Naoise McDonagh, an international business lecturer from Australia’s Edith Cowan University, said the new controls imposed by China would “shock the system” because they target vulnerabilities in US supply chains.

He added, “The timing actually disturbed the negotiation timeline that the Americans wanted.”

Rare earth minerals are essential for the production of a whole range of technology such as solar panels, electric cars, and military equipment.

For example, it is estimated that a single F-35 fighter jet requires more than 400 kg (881.8 lb) of rare earth elements for its stealth coating, engines, radars and other components.

China’s rare earth exports also account for about 70% of the global supply of metals used in magnets in electric vehicle motors, said Natasha Jha Bhaskar of consultancy Newland Global Group.

Marina Zhang, a critical minerals researcher from the University of Technology Sydney, said Beijing has worked hard to assert its dominance in rare earths processing capacity globally.

She added that the country has nurtured a large pool of talent in this field, while its research and development network is years ahead of its competitors.

Although the United States and other countries are investing heavily in developing alternatives to China for their rare earth supplies, they are still some way from achieving this goal.

With large deposits of rare earth elements, Australia is considered a potential competitor to China. Zhang said the production infrastructure is still underdeveloped, making processing relatively expensive.

Even if the United States and all its allies made rare earth processing a national project, I would say it would take at least five years to catch up with China.

The new restrictions expand measures announced by Beijing in April that caused a global supply crisis, before a series of deals with Europe and the United States eased the shortage.

The latest official figures from China show that exports of vital minerals fell in September by more than 30% compared to last year.

But analysts say the Chinese economy is unlikely to be harmed by lower exports.

Professor Sophia Kalantzakos of New York University said rare earths make up a very small part of China’s $18.7 trillion-a-year economy.

Some estimates put the value of exports at less than 0.1% of China’s annual GDP.

She said that while the economic value of rare earths to China may be small, its strategic value is “huge,” because it gives Beijing greater leverage in talks with the United States.

Despite accusing China of “treason”, Besant left the door open to negotiations.

“I think China is open to discussion and I am optimistic that the escalation can be stopped,” he said.

During a meeting with US private equity group Blackstone CEO Stephen Schwarzman on Thursday, Chinese Foreign Minister Wang Yi also stressed the need for the talks.

“The two sides should engage in effective communication, properly resolve differences, and promote the stable, healthy and sustainable development of China-US relations,” Wang said, according to the ministry’s website.

Professor Kalantzakos said what China has done recently is “put its ducks in a row” ahead of those trade talks with the US.

Bhaskar said that by limiting exports of rare earths, Beijing had found the “best immediate way” to pressure Washington to reach a favorable deal.

Jiao Yang of Singapore Management University believes that although Beijing holds the cards in the short term, Washington has some strategic options at its disposal.

Professor Jiao said the United States could offer to lower tariffs, which would likely be attractive to Beijing because the trade war has hit its manufacturers hard.

China’s economy depends on income from the goods it manufactures and exports. The latest official figures show that its exports to the United States fell by 27% compared to last year.

Professor McDonagh said Washington could also threaten to hit China with more trade restrictions to hamper efforts to develop its technology sector.

For example, the White House has already targeted China’s need for advanced semiconductors by blocking its purchases of Nvidia’s most advanced chips.

But experts say this is likely to have only limited effects.

Professor McDonagh said measures targeting Beijing’s technology industry may slow China down but “won’t stop it in the water”.

He added that China has shown through its recent economic strategy that it is willing to endure some pain to achieve its long-term goals.

“China can survive even if it costs much more under US export controls.

“But if China cuts off the supply of these rare earth elements, that could stop everyone’s industry. That’s the big difference.”