<\/p>\n
(Bloomberg) — China\u2019s sweeping new restrictions on rare earth exports jolted governments and set off a race to secure alternative supplies, in a stark demonstration of Beijing\u2019s global clout and growing risks for companies.<\/p>\n
The rules announced last week require overseas firms to obtain Chinese government approval before exporting products containing even trace amounts of certain rare earths that originated in China. They prompted threats of punitive measures from Washington even as both sides signal an openness to talks, and pushback from the European Union.<\/p>\n
Most Read from Bloomberg<\/p>\n
US President Donald Trump on Tuesday said he might stop trade in cooking oil with China, ostensibly to retaliate against Beijing\u2019s refusal to buy American soybeans. He previously threatened to impose an additional 100% tariff on goods from China by Nov. 1 and raised the prospect of canceling his meeting with Chinese leader Xi Jinping in South Korea later this month.<\/p>\n
The European Union \u201cshould have a tough response,\u201d Danish Foreign Minister Lars Lokke Rasmussen, whose country chairs the EU\u2019s rotating presidency, said Tuesday. EU Economy Commissioner Valdis Dombrovskis charged China with \u201cusing trade interdependencies for political gain,\u201d speaking in Washington as global finance chiefs gathered for fall meetings of the International Monetary Fund and World Bank.<\/p>\n
<\/p>\n
While the degree of disruption will hinge on how broadly the new rules will be applied, the move has already energized companies and policymakers alike to look for potential counter-measures, and eventual alternatives to China\u2019s critical inputs.<\/p>\n
\u201cWe will not let these export restrictions and monitoring go on,\u201d US Treasury Secretary Scott Bessent said in a Fox Business interview Monday. \u201cThey have pointed a bazooka at the supply chains and the industrial base of the entire free world.\u201d<\/p>\n
The American official said he expected to get coordinated support from Europe and India, along with other democratic governments in Asia \u2014 an apparent reference to nations such as Japan and South Korea. Dombrovskis said he expects discussions this week at a meeting of the Group of Seven in Washington.<\/p>\n
In India, automakers and parts suppliers have begun accelerating testing of ferrite-based magnets as a less efficient but geopolitically safer substitute for the heavy rare earths they previously relied on, according to people familiar with the matter. For now, they have enough inventory until December, the people said.<\/p>\n
Taiwan\u2019s economic minister, Kung Ming-hsin, said Tuesday the government will start encouraging local companies to recycle and refine rare earths to ensure a stable supply for its domestic industries. He said China\u2019s latest measures will impact motor, car and drone makers, while the chip sector is largely unaffected.<\/p>\n
Meantime, tit-for-tat protectionist measures continue apace, beyond tariff hikes already imposed. China on Tuesday unveiled sanctions on US units of a South Korean shipping giant, part of a broader array of measures in the maritime space between Beijing and Washington. And the EU is considering forcing Chinese companies to hand over technology to European ones if they want to operate locally.<\/p>\n
WATCH: China sanctioned five US units of South Korean shipping giant Hanwha Ocean Co. and threatened further retaliatory measures on the industry. Rosalind Mathieson reports.Source: Bloomberg <\/p>\n
Backfire Risk<\/p>\n
The barrage of steps mark China\u2019s first major effort to police the global flow of critical minerals it dominates, using the same playbook that allows the US to wield power far beyond its shores.<\/p>\n
\u201cAfter decades of striving, China finally has a few real technological advantages over America,\u201d wrote Arthur Kroeber and Laila Khawaja at Gavekal Research in a Monday note.<\/p>\n
Overly aggressive rare-earth implementation by China could supercharge efforts to build alternative supply chains, undermining China\u2019s long-term dominance \u2014 the same way that Washington\u2019s export controls on advanced semiconductors risk backfiring and spurring Chinese innovation.<\/p>\n
Australian mining companies with critical minerals projects made dizzying stock gains Tuesday, with shares of Resolution Minerals Ltd. closing up 56% and Nova Minerals Ltd. gaining 16%.<\/p>\n
<\/p>\n
\u00a0<\/p>\n
China\u2019s measures represent President Xi\u2019s adaptation of tactics that were pioneered by the US \u2014 using dominance in critical sectors as a cudgel against foreign rivals. Where Washington has the capacity to wield the dollar to exercise long-arm jurisdiction, China is now deploying its stranglehold on rare earth processing and the production of permanent magnets.<\/p>\n
\u201cThe US has unmatched leverage in financial markets because of the dollar\u2019s reach and because of the centrality of the US financial system,\u201d said Chris Kennedy, a senior geoeconomic analyst at Bloomberg Economics who previously served at the National Security Council in the Biden and Trump administrations. \u201cChina has global leverage in its dominance of key industries that are essential to global manufacturing.\u201d<\/p>\n
China\u2019s Dominance<\/p>\n
The addition of five rare earths to China\u2019s restricted list \u2014 holmium, europium, ytterbium, thulium and erbium \u2014 will make it harder for companies to find replacements for magnets made with the seven minerals that were originally affected by restrictions Beijing unveiled in April.<\/p>\n
In the short term, alternatives remain limited. China is responsible for 70% of the world\u2019s mined rare earths and more than 90% of permanent magnets made with the minerals. While companies in the EU and US have previously reported supply shortages and production halts during earlier Chinese restrictions, building replacement capacity takes years.<\/p>\n
If rigorously enforced, the policy serves as a made-with-Chinese-technology chokepoint that affects virtually every modern industry that relies on high-performance permanent magnets. The measures apply not just to raw materials but to products made overseas using Chinese rare earth inputs \u2014 even when those materials make up as little as 0.1% of a product\u2019s value.<\/p>\n
China\u2019s Ministry of Commerce justified the restrictions on national security grounds, noting that medium and heavy rare earths have important military applications. Officials emphasized the measures would not prohibit exports entirely, and promised to approve applications meeting regulatory requirements.<\/p>\n
Regardless of the intent, the ambition to police the global flow of the minerals was captured in a Monday commentary by a researcher for the Chinese Academy of Social Sciences, a top government-linked think tank.<\/p>\n
Wang Ziyang, assistant research fellow at the institution, said China is shifting from being a supplier to a \u201cgovernor of the rare earth order,\u201d arguing that the measures prevent the military use of the elements and are in the common interest of the global community.<\/p>\n
The latest move caps years of expansion in Beijing\u2019s export control regime. Since 2020, China has systematically built an architecture mirroring US controls, from blacklisting entities to establishing extraterritorial jurisdiction over Chinese-origin technology.<\/p>\n
The timing appeared linked to Washington\u2019s lengthening of an entity list that targets Chinese semiconductor firms \u2014 a move that Beijing saw as violating bilateral understandings reached in Madrid last month that neither side would impose new controls during trade talks.<\/p>\n
The controls may serve as negotiating leverage ahead of expected discussions between Xi and President Donald Trump later this month. Kroeber and Khawaja said that the announcement set up a negotiation for China to relax its rare earths export controls in exchange for matching US concessions on semiconductor export controls.<\/p>\n
No matter the outcome of those talks, a full reversal appears unlikely, according to Oliver Melton, until recently the US Treasury attache in Beijing and now director of Rhodium Group\u2019s China practice.<\/p>\n
\u2018To the End\u2019<\/p>\n
\u201cThis is a strategic decision to ensure that they have sustained and persistent leverage over the US and other countries to deter future export controls against China,\u201d he said. \u201cChinese policymakers are keenly aware that they have the ability to disrupt production for major US companies in ways that maximize the impact on US markets \u2014 for example by targeting firms like Apple and Tesla.\u201d<\/p>\n
China\u2019s Ministry of Commerce signaled openness to dialogue while defending its actions, saying in a Tuesday statement that Beijing would \u201cfight to the end if necessary,\u201d while the door remains open for talks.<\/p>\n
Beyond retaliation and negotiation tactics, the measures advance Beijing\u2019s broader industrial strategy. By controlling access to processing technologies and manufacturing equipment, China aims to keep competitors behind while incentivizing partnerships with Chinese firms.<\/p>\n
The rules on overseas manufacturers using Chinese rare earths or related equipment take effect on December 1. The 0.1% value threshold could affect large swaths of intermediate goods and will likely cause major administrative delays.<\/p>\n
–With assistance from Josh Xiao, Yian Lee, Martin Ritchie, Jing Li, Fran Wang and Lucille Liu.<\/p>\n
(Updates with Trump\u2019s comments on cooking oil and Taiwan\u2019s response to Beijing\u2019s move.)<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — China\u2019s sweeping new restrictions on rare earth exports jolted governments and set off a race to…\n","protected":false},"author":3,"featured_media":304320,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[9710,3638,64,74,8697,5005,154409,94999,67,132,68,2058],"class_list":{"0":"post-304319","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-beijing","9":"tag-bloomberg","10":"tag-business","11":"tag-china","12":"tag-european-union","13":"tag-president-donald-trump","14":"tag-punitive-measures","15":"tag-rare-earth","16":"tag-united-states","17":"tag-unitedstates","18":"tag-us","19":"tag-washington"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115376054863194861","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/304319","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=304319"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/304319\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/304320"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=304319"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=304319"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=304319"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}