China responds to Trump’s tariffs by cutting off US supplies of some of the modern world’s vital minerals

Over the last 25 years, China has strategically positioned itself as a dominant player in the rare earth metals market. These resources are essential components in the production of telecommunications devices and military weapons. This power held by China over this critical market was evident on Friday when Beijing retaliated against tariffs imposed by President Donald Trump on Thursday, April 2.

China imposes export controls on rare earth metals

Following President Trump’s announcements that goods from China would see a 34 percent tariff applied at import, China announced that it would impose export controls on rare earth metals, limiting access for US buyers.

The export controls do not single out the US, but they will make it more challenging for US buyers to access these materials, as they will be competing with other countries in a more scarce market. The metals under the new export rules include samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These metals are used in the production of superconductors, magnets, lasers, and more.

China’s power within the rare earth market

The US Geological Survey reported last year that in 2023, China accounted for around 68 percent of the mine production of these metals. Meanwhile, the US only represented around 12 percent.

Although the US and its allies have attempted to strengthen their presence in this sector, China’s strategy of operating industries at a loss to secure market dominance has left the US vulnerable and dependent. While cheap imports have allowed US companies to achieve greater profits, it is increasingly evident that these short-term benefits that allowed them to boost the value of stock were favored over investments that would have prevented China from reaching a market share that leaves the US reliant on their exports in the long run. Former President Trump highlighted this critical difference between the US and Chinese systems: the former makes decisions based on quarterly results, whereas the latter plans for decades ahead and is willing to endure short-term discomfort to gain long-term advantages.

What export controls on rare earths mean for US companies

These metals are not only vital for chip production but also for weapons manufacturing, highlighting a significant national security weakness in the supply chain of the country’s military equipment.

President Trump criticized China’s decision, stating that they had “played it wrong” and indicated that the US might take additional actions.

These tariffs, along with those on other key trading partners, have caused markets to spiral, both in the US and China. Since Donald Trump was inaugurated, the S&P500 has dropped by 16 percent, and just in the last week, the Shanghai Composite Index has fallen by around 7 percent.

The multinational law firm Holland & Knight reported that prices for rare earth materials could rise rapidly, with the potential to double in the short term.

The organization added, “some analysts [are ] anticipating a 500 percent increase in the near future.” They suggest that those who can stockpile these materials should do so to avoid higher prices as the new rules take effect.

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