On October 9th, China proposed new restrictions on rare earth metal exports. Trump swiftly fired back, threatening of 100% tariffs on Chinese imports – a move that triggered the market’s steepest drop since in April 2025.
Under China’s new proposal, foreign firms that use or sell products containing as little as 0.1% rare earths, will be required to obtain an export license approved by the Chinese government. To receive approval, firms must report how they intend to use the rare earth metals, effectively forcing firms to ask Chinese government for permission to export. The new proposal also explicitly bans that use of rare earth in foreign defense applications.
This proposal takes direct aim at global supply chains as major industries such as semiconductors, defense, electric vehicles, and renewable energy. Rare earth metals are critical components in technologies ranging from iPhones, MRI scanners, to wind turbines. China’s strong arms in these industries are particularly powerful as 70% of rare earth’s mines and 90% of rare earth processing are located in China, effectively monopolizing a cornerstone in the modern manufacturing.
Until the 1980’s, the US was actually the largest producer of rare earth metals. The US has since fallen behind China in producing and processing power with Noveon Magnetics currently being the only US rare earths magnetic manufacturer. While the US still has stockpiles to rely on, “China has absolute dominance here,” says Graceline Baskaran, the director of the Critical Minerals Security Program at the Center for Strategic and International Studies.
This announcement comes at a delicate moment as it sits after the US and Chinese rare earths agreement in June and prior to President Trump’s and President Xi’s upcoming meeting at the Asia Pacific Economic Cooperation (APEC) Summit in South Korea at the end of October.
Trump’s initial response appeared on TruthSocial as Trump threatened a 100% tariffs on China and their exports. US markets tumbled 2.7%, the sharpest fall since April. However, over the weekend, Trump eased investor fears with another social media post stating, “Don’t worry about China, it will all be fine… The U.S.A. wants to help China not hurt it.” Markets rebounded as the week opened but Trump’s weekend post sparked renewed conversation over TACO (Trump Always Chickens Out) trades.
While the Chinese proposals have yet to be formalized, analysts speculated that these restrictions were announced as preparations for leverage in the coming APEC summit. Between tariffs, soybeans, and Nvidia chips, weaponizing the rare earth may prove as “a very powerful negotiating tool,” says Baskaran
Calvin Huang 