President Trump’s trade war with China is already starting to backfire, and China’s dominance in rare earth minerals could soon become a powerful weapon in the next round of negotiations, analysts warn.
According to the U.S. Geological Survey, China produced nearly 400,000 metric tons of rare earth materials last year, accounting for 69% of global supply.
These elements are essential to nearly every corner of the modern economy, from smartphones and electric vehicles to advanced defense systems.
Without them, manufacturing in the U.S. and its allies would grind to a halt.
So far, Beijing’s export restrictions cover just 7 of the 17 critical rare earths, but that could escalate fast.
“China is just getting started on squeezing Trump and the U.S. economy,” wrote S.L. Kanthan, host of Geopolitics Demystified.
He pointed out that even these early curbs target dysprosium and samarium, two elements where China controls more than 95% of the global market.
Energy analyst Robert Bryce criticized Trump for “ignoring history” and misjudging leverage.
“China has the U.S. and global auto sectors by the supply short hairs,” he wrote, adding a chilling reminder from Chinese media during Trump’s first trade war: “Don’t say we didn’t warn you.”
Michigan Senate candidate Haley Stevens seconded Bryce, warning that China’s chokehold on rare earths poses a major threat to her state’s auto industry.
“Trump’s tariffs are threatening our supply of rare earth minerals from China, which our auto industry relies on,” Stevens said. “This is dangerous for Michigan and our manufacturing economy.”
Meanwhile, Kyle Chan, a Princeton researcher and author of the High-Capacity newsletter, said some U.S. automakers are already weighing production shifts to China to avoid getting cut off from rare earth magnets.
Rare earths bring U.S. and China back to the table
As The New York Times reported, China’s grip on rare earth supplies played a key role in dragging both countries back into talks this week.
After two days of marathon negotiations in London, the US and China walked away with a handshake and a framework, but no deal.
The plan is to reopen the flow of critical exports like rare earths and ease up on some chip controls. Now it goes to the only two people who matter: Trump and Xi.
Commerce Secretary Howard Lutnick called the meetings “positive trade, growing trade” talks after “getting the negativity out.”
The Chinese side pledged to speed up mineral shipments, while Washington signaled it may loosen restrictions on semiconductors, which were long untouchable under U.S. national security policy.
Despite the supposed breakthrough, markets barely budged.
U.S. futures dipped. Yuan stayed flat. Even China’s benchmark index, which posted its biggest gain in weeks, looked more like a shrug than a celebration.
That's because this isn't a deal; it’s a draft.
“Markets will likely welcome the shift from confrontation to coordination,” said Saxo’s Charu Chanana. “But we’re not out of the woods yet, it’s up to Trump and Xi to approve and enforce the deal.”
Meanwhile, the stakes are growing. The World Bank warned Tuesday that the trade war could shave 0.4 percentage points off global GDP this year, saying nearly every country now faces “significant headwind.”
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