KEY TAKEAWAYS
- China’s October 2025 export controls mark the most expansive rare earth restrictions in history, covering 12 of 17 REEs and key technologies essential for electric vehicles, wind turbines, and semiconductors.
- MOFCOM’s Notices Nos. 56–59 and 61 extend beyond minerals to include processing equipment, high-density batteries, graphite anodes, and superhard materials, thus creating a multi-tiered chokehold on global supply chains.
- Implementation begins December 2025, with immediate provisions already disrupting trade and investment planning across allied economies.
- President Trump’s retaliatory 100% tariffs raise effective import duties to around 130%, triggering sharp market declines and rare earth price surges exceeding 15%.
- Beijing’s strategy mirrors U.S. export-control mechanisms, enforcing extraterritorial licensing rules akin to Washington’s Foreign Direct Product Rule, highlighting symmetrical escalation.
- Economic fallout is asymmetric: U.S. consumers and manufacturers bear most costs, while China’s state-backed ecosystem cushions domestic impact.
- Supply-chain vulnerabilities in defence, green energy, and technology reveal U.S. dependence on Chinese processing and refining capacity exceeding 90%.
- The confrontation accelerates global decoupling, fragmenting trade blocs into competing industrial ecosystems.
- The episode redefines strategic power—demonstrating that control of materials, not nations, now determines indispensability in the 21st-century world order.
On 19 February 1998, Secretary of State Madeleine K. Albright defined the United States of America as “the indispensable nation.” This phrase became the epitome of American exceptionalism: special rules apply to the U.S., and the rules applying to the rest of the world need not apply to the U.S.; Donald Trump echoed this in his second term’s inaugural address: “We will be a nation like no other, full of […] exceptionalism.” It only naturally follows that the U.S. experiences profound astonishment when other nations indeed reciprocate or fight back—which is precisely what China just did.
China’s historic escalation in rare earth controls
The events of early October 2025 represent a pivotal escalation in the protracted Sino–American rivalry, wherein Beijing has leveraged its unparalleled dominance in critical minerals to impose a regime of export controls that reverberates across global supply chains. On 9 October, the Ministry of Commerce (MOFCOM) and the General Administration of Customs promulgated a series of four announcements (designated Nos. 56 through 59) collectively establishing the most stringent restrictions on rare earth elements (REEs) and ancillary technologies to date.
These measures build upon prior curbs but introduce unprecedented breadth and extraterritoriality, targeting not only the minerals themselves but the infrastructure of their extraction, refinement, and downstream application.
Scope and mechanisms of Beijing’s export controls
Announcement No. 61, the focal point, extends export licensing requirements to twelve of the seventeen REEs, incorporating five newly controlled elements: dysprosium, terbium, yttrium, gadolinium, and scandium. These elements are indispensable for the production of high-performance permanent magnets, such as neodymium-iron-boron alloys, which constitute over 90 per cent of the global supply and are essential for applications ranging from electric vehicle motors to wind turbine generators and advanced semiconductors.
Complementing this, No. 56 delineates controls on REE processing equipment, encompassing 26 sub-items—from centrifugal extractors capable of handling 5,000 cubic metres per day of leachate to vacuum induction furnaces operating at frequencies of 1–8 kHz and temperatures up to 1,700°C, and specialised crystal growth furnaces employing the Tira method at 2,300°C.
No. 57 imposes restrictions on high-energy-density batteries exceeding 300 watt-hours per kilogram—critical for long-range electric vehicles and unmanned aerial systems—alongside their fabrication apparatus, such as electrode coaters.
No. 58 targets upstream battery materials, including graphite anodes (where China commands 80 per cent of global capacity) and cathode precursors like nickel-cobalt-manganese formulations.
Finally, No. 59 regulates superhard materials, notably synthetic industrial diamonds with particle sizes of 5 micrometres or finer and oxygen content below 80 parts per million, indispensable for precision machining in semiconductor wafer production.
Implementation and strategic design
MOFCOM published these notices on 9 October 2025. Some provisions took effect immediately upon publication, while the main licensing requirements and extraterritorial provisions enter into force on 1 December 2025. These controls mandate case-by-case MOFCOM approvals for dual-use exports, with presumptive denials for military or advanced technological end-uses, including logic chips at 14 nanometres or below, memory stacks of 256 layers or more, and artificial intelligence research with potential defence implications.
Extraterritorial provisions require licensing for any re-export incorporating 0.1 per cent or more of Chinese-origin REEs or derived technologies, effectively mirroring the U.S. Foreign Direct Product Rule. Beijing’s dominance underpins this architecture: according to the U.S. Geological Survey’s 2025 Mineral Commodity Summaries, China accounted for about 69 per cent of global REE mining output (270,000 metric tons in 2024, rising to an estimated 280,000 in 2025), around 90 per cent of refining capacity, and roughly 90–93 per cent of permanent magnet production. Framed as safeguards for “national security and interests” under the Export Control Law of the People’s Republic of China, these measures echo the 2010 restrictions on Japan, which precipitated a 500 per cent price surge, but with amplified scope amid heightened technological interdependence.
Trump’s retaliation and market turmoil
President Trump’s response, articulated via a Truth Social post on 10 October, evinced characteristic indignation and improvisation. Characterising China’s actions as an “extraordinarily aggressive position” and a “moral disgrace” in international trade, Trump announced an additional 100 per cent tariff on all Chinese imports (superimposed upon the extant 30 per cent baseline from the April 2025 Geneva truce, yielding effective rates of about 130 per cent) effective 1 November “or sooner, depending on any further actions or changes taken by China.”
He concurrently pledged export controls on “any and all critical software,” a capacious category encompassing artificial intelligence algorithms and integrated circuit design tools, and dispatched a detailed missive to President Xi Jinping enumerating U.S. precedents from the 2019 Huawei designation onward. The Federal Communications Commission expeditiously prohibited Huawei equipment sales on domestic e-commerce platforms, while the Bureau of Industry and Security signalled imminent restrictions on Boeing avionics components and semiconductor consumables, such as photoresists, where China’s stockpiles are finite.
Immediate economic repercussions
This salvo was tempered by Trumpian equivocation: an initial threat to abrogate the Asia-Pacific Economic Cooperation summit with Xi in South Korea later that month was retracted within hours to “we might have” a meeting, affording a negotiating aperture.
Financial markets registered immediate disquiet: the Standard & Poor’s 500 index declined about 2.7 per cent, evaporating roughly $700 billion in market capitalisation within minutes, while the Nasdaq Composite fell around 3.6 per cent, with neodymium-praseodymium oxide prices ascending about 15 per cent to $85 per kilogramme.
Trump’s rhetoric, however, pivoted to deflection, imputing the downturn to Beijing’s “hostile” machinations rather than endogenous fragilities.
Strategic reciprocity and asymmetric fallout
China’s manoeuvre constitutes a calibrated reciprocity to a sequence of U.S. techno-economic constrictions, emblematic of negative reciprocity in iterated great-power competition. The proximate catalyst was the U.S. Department of Commerce’s September–October expansion of the Entity List, designating multiple Chinese entities (including Fudan Microelectronics) for activities ostensibly undermining national security in semiconductors and artificial intelligence.
This augmented the 29 September “Affiliates Rule” (or “50 per cent Rule”), which extrapolates restrictions to any subsidiary owned 50 per cent or more by listed firms, ensnaring over 1,100 Chinese actors and inverting the 2020 Foreign Direct Product Rule to preclude third-country diversions of U.S.-origin technology. These actions contravened the fragile June 2025 London framework, which had suspended April’s 145 per cent tariffs in exchange for partial REE leniency on seven elements.
Patterns of reciprocity and strategic symmetry
Viewed longitudinally, Beijing’s response iterates a pattern: the 2018 Section 301 tariffs elicited 2023 gallium and germanium curbs; April 2025’s escalations prompted initial REE restrictions. The October quartet emulates U.S. mechanisms structurally—licensing regimes with extraterritorial bite—while exploiting asymmetric leverage: whereas Washington curtails end-use chips (reducing China’s 5 nanometre yields below 20 per cent, per TechInsights), Beijing throttles upstream inputs, rendering U.S. sanctions self-defeating in a mineral-dependent ecosystem.
As articulated in Chatham House analyses, this “stark warning” to the West underscores reciprocity not as vengeance, but as deterrence in a bifurcating order.
U.S. economic fallout and industry disruption
The repercussions for the United States are manifold, bifurcating into acute short-term disruptions and protracted long-term reconfigurations. In the immediate horizon (encompassing the November/December window prior to full implementation), supply-chain frictions threaten to exacerbate inflationary pressures and attenuate growth. REE-dependent sectors, including electric vehicles (where motor costs could escalate 20 per cent) and defence systems (78 per cent of Department of Defence platforms, such as F-35 actuators), confront bottlenecks that may idle production lines and precipitate 50,000 manufacturing redundancies, according to projections by the Peterson Institute for International Economics.
Consumer prices for electronics and renewables may surge 1–2 per cent, compounding the Federal Reserve’s vigilance amid post-pandemic recovery; cryptocurrency liquidations surpassed $200 million on 10 October, underscoring financial contagion. The CHIPS and Science Act’s $52 billion allocation for domestic fabrication risks obsolescence without REE inputs, potentially derailing the artificial intelligence surge as firms like Nvidia confront sputtered wafer production.
Long-term decoupling and structural shifts
Over the longer arc, to 2030 and beyond, these controls portend geoeconomic decoupling with cumulative costs exceeding $1 trillion, per estimates from the Rhodium Group, as the U.S. grapples with supply elasticities demanding 10–15 years for viable alternatives.
Refining capacity, concentrated in China at about 90 per cent, necessitates $10–15 billion in investments for facilities like MP Materials’ Mountain Pass, yet premiums of 140–160 per cent vis-à-vis Beijing’s subsidised output could stifle innovation in green technologies and erode U.S. competitiveness in a $1.4 trillion global REE market. International Monetary Fund simulations anticipate a 0.5–1 per cent drag on U.S. gross domestic product, amplified by allied spillovers (e.g., European turbine manufacturers face 15 per cent cost increments) fostering a fragmented technological landscape where China advances unencumbered. Such restrictions may prove transient for Beijing but enduringly corrosive for Washington, accelerating a “strategic game” of attrition.
The geopolitics of techno-mercantilism
Geoeconomically, the episode exemplifies the fragmentation of global value chains, with IMF analyses forecasting a 1–2 per cent diminution in world output by 2030 from decoupling, as REE volatility presages “commodity cold wars” analogous to the 1973 oil embargo. China, pursuing 5 per cent growth amid deflationary headwinds, wields temporal advantage; the U.S., encumbered by $37 trillion in sovereign debt, confronts fiscal imperatives that tariffs exacerbate rather than alleviate. The shifting world structure—evoking the post-Bretton Woods polycentrism—demands recalibration: resilience via multilateral pacts, such as the Minerals Security Partnership, rather than unilateral bluster. Absent such adaptation, the indispensable nation risks self-marginalisation in a realm where reciprocity, once a liberal tenet, now enforces equilibrium among equals.
Arguably, it is not a given that there are indeed “indispensable nations”—yet, as it emerges, there are indeed indispensable materials.
Machine translations of selected indicative original sources: [1], [2], [3]
* Sotiris Mitralexis holds a doctorate in political science and international relations; he works at University College London as a research fellow.