I waited a week to understand how this move would unfold, in a context where all the initiatives in this long and complex trade war are changing rapidly, because I wanted to avoid heated arguments. Now I have a clearer picture.
On October 11, China did something the United States believed was exclusive to it: it told the rest of the world what it can sell and to whom. Not within its borders. Everywhere. Beijing's new rules on rare earths work like the American ones on chips: if a European, Japanese, or Korean company wants to export certain minerals, even if processed outside China, it must ask Beijing for permission.
It's a bit like when Washington blocked Huawei, cutting off anyone using American technology. Only this time, the roles are reversed. Trump threatened 100% tariffs, then wrote on Truth Social: "Don't worry about China, everything will be fine." The markets crashed anyway. And how will it go from now on? I can only speculate, but not at random.
The foreign direct product rule, but in reverse
In 2020 Washington has dusted off an obscure rule call foreign direct product rule to target Huawei. The principle was simple: no company in the world could sell a product to Huawei if it contained American components or was manufactured with American technology. And since the United States plays a key role in the chip industry, the rule covered virtually the entire advanced technology sector. It was an aggressive move that many governments had to endure, even grumbling, because they depended on American technology.
Time Beijing has taken that same logic and applied it to rare earths.From December 1, 2025, anyone wishing to export these critical minerals will need to obtain a Chinese license, even if the material is processed in Europe, Japan, or the United States. China controls 85% of global refining of rare earths and has built a monopoly that goes well beyond extraction: it owns most of the patents for the processing of these minerals. It's vertical integration taken to the extreme.
When the DEW Line Turned Earth into a Cosmic Lighthouse
China's dominance in rare earths is no accident. It is the result of decades of industrial planning that began in the 80s, when Beijing realized these minerals would become strategic. The United States, for its part, dismantled its production capacity in the 90s when mining in California became too expensive and polluting.
China has already used this weapon in 2010 against Japan during a territorial dispute, cutting exports and sending prices soaring from $9,46 a tonne to $66,96 in two years.
That crisis didn't teach the West much. Ford and other automakers were forced to halt production in April 2025, when Beijing introduced the first limited restrictions. Trump responded by raising tariffs on Chinese goods to 145%. China responded by raising its own tariffs to 84% and then, on October 11, announced the global licensing system. Treasury Secretary Scott Bessent accused Beijing of "harming the global economy." but the truth is that after this latest move, which raises the bar in the trade war, Washington has found itself taken aback.
Rare earths are not rare in the geological sense: they are found almost everywhere on the earth's crustThe problem is that extracting and refining them is expensive, polluting, and requires specialized know-how. China has invested billions to build this capacity while the West has relocated. Now Beijing holds 40% of the world's reserves, produces over 60% of the oxides and controls 85% of the refining. The United States and Europe are entirely dependent on China for their domestic demand.
The trade war becomes a resource war
The timing of the Chinese move is not coincidental. Two weeks earlier, on September 29, the United States had extended technology controls to the subsidiaries of all companies on the "entity list." Beijing interpreted this move as a breakdown, perhaps definitive, of the fragile truce reached after Trump and Xi spoke on the phone in August. China's response was multifaceted: inspections of lithium battery equipment, additional port fees on American ships, an antitrust investigation into Qualcomm, and finally global restrictions on rare earths.
Chris Miller, professor at Tufts University and author of Chip War, called the implications of China's licensing system "extraordinarily far-reaching," as they cover virtually all semiconductors produced globally. Companies will be required to provide Beijing with detailed information about their manufacturing processes and supply chains. A level of transparency that makes Western governments tremble, concerned that this data could be used for strategic or industrial purposes.
But there is a paradox. While China has spent billions to develop its chip industryIt could take the United States years to rebuild its rare earth supply chain. "If China manages to circumvent chip controls but the U.S. needs more time to replace rare earths, it will be a big problem for Washington," he explains. Martin Chorzempa of the Peterson Institute.
Who loses more when two elephants fight?
An African proverb says that when two elephants fight, the grass suffers. In this case, the grass is the rest of the world. Europe risks (for a change) being crushed between the two superpowers. 98% of the EU's rare earth supply comes from China. The European automotive industry, already struggling with the electric transition, could see its plans slowed if Beijing decides to further tighten its grip. Chinese products no longer reaching the United States due to tariffs are flooding European and Southeast Asian markets, creating unfair competition for local industries.
Bessent announced that the United States will seek a coordinated response with Europe, Australia, Canada, and India. But building alternative supply chains requires time, capital, and political will. MP Materials is working on the first processing plant on American soil since the bankruptcy of Molycorp, with the support of the Pentagon. Australia's Lynas is opening a plant in Texas. But it will be years before these facilities become operational on an industrial scale.
The most disturbing fact? China and the United States together account for 43% of the global economy, according to the International Monetary Fund. An open trade war between these two powers would not only directly affect them: it would be an economic storm capable of overwhelming entire sectors, emerging economies, and developed markets. Global investment would suffer, and several economies could fall into recession.
The lesson no one wanted to learn
Yeling Tan, professor at Oxford University, notes that Chinese restrictions could prove costly for Beijing itself in terms of its credibility as a reliable trading partner. “It threatens to undermine China's reputation as a reliable trading nation,” he says. But Xi Jinping He understood that with Trump, you should never turn the other cheek. Beijing's position is clear: "If you want to fight, we will fight to the end. If you want to negotiate, our door remains open."
Trump threatened to cancel the meeting with Xi Jinping scheduled for late October in South Korea and impose additional 100% tariffs starting November 1. After the markets collapsed, he tried to reassure: "Don't be afraid of China." But the truth is that Washington has discovered that it is vulnerable Just as Beijing was when it depended on American technology. Globalization has created interdependencies that work in both directions.
The trade war is no longer just a matter of tariffs and counter-tariffs. It has become a competition for control of strategic resources that will determine who will wield technological and economic power in the coming decades. And in this game, contrary to what many thought, China may have more cards to play than the United States was willing to admit.
As long as it lasts.
