How China Gained Rare Earth Dominance and Weaponized It in Global Trade

 

Introduction

In the 21st century, control over critical minerals like rare earths has become a strategic asset. China, through decades of calculated policy, investment, and industrial consolidation, has emerged as the dominant force in the global supply of rare earth elements. These minerals—such as gallium, germanium, graphite, and antimony—are essential for manufacturing semiconductors, electric vehicles, military equipment, and clean energy technologies.

This blog explores how China seized control of these resources and how it now uses this dominance as leverage in global trade negotiations, particularly with the United States and its allies.

China’s Strategic Path to Rare Earth Dominance

China’s rise in the rare earth sector wasn’t accidental. Over the past two decades, the country has:

• Invested heavily in domestic mining and refining infrastructure
• Subsidized rare earth producers
• Imposed strict environmental regulations that pushed competitors out of the market
• Consolidated the industry under state-owned enterprises

By 2024, China controlled the majority of global production and refining of key minerals like gallium and germanium, which are vital for semiconductors.

Export Bans and Trade Weaponization

In December 2024, China escalated its control by issuing a comprehensive export ban on four critical minerals—gallium, germanium, graphite, and antimony—specifically targeting the United States. This move was not just a response to U.S. technology restrictions but a strategic maneuver to disrupt global supply chains and assert geopolitical influence.

The ban extended beyond direct exports to include transshipment restrictions, meaning even third-party countries could not re-export Chinese minerals to the U.S. This unprecedented step marked a significant escalation in the U.S.-China trade war.

Impact on Global Supply Chains

China’s mineral embargo has forced multinational corporations to reassess their supply chains. Companies now face a dilemma:

• Continue sourcing from China and risk U.S. market access
• Shift operations to alternative suppliers, often at higher costs and lower reliability

This fragmentation of supply chains could lead to regionalized production ecosystems, where firms choose between aligning with U.S. or Chinese markets.

Semiconductors and Military Technology at Risk

The minerals under embargo are not just industrial inputs—they are strategic resources. For example:

• Gallium and germanium are used in high-speed chips and infrared optics
• Graphite is essential for lithium-ion batteries
• Antimony is used in flame retardants and military-grade alloys

China’s control over these materials gives it leverage in semiconductor production, a sector already strained by global chip shortages and geopolitical tensions.

Historical Precedents and Strategic Signaling

This isn’t the first time China has used mineral exports as a geopolitical tool. In 2010, during a territorial dispute with Japan, China halted rare earth exports, causing global panic and price spikes. The current embargo echoes that strategy but on a broader scale, targeting not just one country but the entire Western supply chain.

China’s actions also signal its intent to retaliate against ongoing and future U.S. trade policies, particularly under the Trump administration, which has already adopted a tougher stance on China.

Trump–Xi Agreement: A Temporary Truce in the Rare Earth War

In late October 2025, President Donald Trump and Chinese President Xi Jinping reached a one-year agreement that significantly alters the rare earth landscape. Under the deal, China agreed to suspend all additional export controls on rare earth elements and critical minerals, effectively reversing its earlier restrictions. This includes easing licensing requirements and allowing continued exports of gallium, germanium, graphite, and antimony—materials vital for semiconductors, EV batteries, and defense systems. In exchange, the U.S. committed to reduce tariffs on Chinese goods from 57% to 47% and cut fentanyl-related tariffs in half, while pausing plans for a 100% tariff hike. Both sides also pledged to resume agricultural trade and energy cooperation.

While the White House hailed the agreement as a “massive victory,” analysts caution that this is a tactical truce rather than a strategic reset. The deal is valid for one year and subject to annual renegotiation, leaving room for future friction. For now, however, the agreement provides temporary relief for global supply chains, averting a looming crisis for industries dependent on rare earths. Semiconductor manufacturers, EV producers, and defense contractors can breathe easier—at least until the next review.

Impact Analysis

• Short-Term Stability: The suspension of Chinese export curbs ensures uninterrupted supply of critical minerals, stabilizing prices and reducing immediate risks for tech and energy sectors.
• Market Confidence: Global markets reacted positively, viewing the deal as a sign of de-escalation in U.S.–China trade tensions.
• Long-Term Uncertainty: The annual review clause means supply chain diversification efforts will continue, as companies seek to reduce reliance on China’s near-monopoly.
• Strategic Rivalry Persists: Despite the truce, both nations remain locked in a broader contest over technological sovereignty and resource control.

China’s Domestic Semiconductor Push

While restricting exports, China is simultaneously investing in its domestic semiconductor industry. The goal is to reduce reliance on foreign technology and become self-sufficient in chip production. However, despite progress in automotive and industrial chips, China still lags in producing high-end semiconductors used in AI and defense.

Global Reactions and Strategic Responses

Countries like Japan, Australia, and members of the EU are now accelerating efforts to diversify mineral sourcing. Initiatives include:

• Investing in rare earth mines in Africa and Australia
• Building refining facilities outside China
• Forming strategic partnerships with the U.S.

Yet, replicating China’s scale and efficiency remains a formidable challenge.

Conclusion: A New Era of Resource Diplomacy

China’s control over rare earths has transformed these minerals into geopolitical weapons. As the world becomes more dependent on advanced technologies, the battle over mineral access will intensify. Nations must now navigate a landscape where resource diplomacy is as critical as traditional trade negotiations.

The rare earth war is not just about economics—it’s about national security, technological sovereignty, and global influence.