China’s Rare-Earth Squeeze Hits US Magnet Makers, Sparking New Trade Clash
China has tightened control over rare-earth supplies, directly targeting two American manufacturers that are central to the Trump administration’s push to rebuild the U.S. supply chain for critical magnets, raising the risk of a fresh trade clash between the world’s two largest economies [178998].
The move comes as Beijing pushes back against criticism of its trade practices, with Vice-Premier Ding Xuexiang stating on Monday that “China never actively pursues a trade surplus” and blaming “certain countries that abuse export controls” for blocking Chinese imports [178870]. This response followed German Chancellor Friedrich Merz’s call for stronger global action on the yuan, adding to international pressure on Beijing [178870].
The rare-earth restrictions are the latest in a series of Chinese countermeasures. In April 2025, China imposed export controls on rare-earth minerals in response to U.S. tariffs and EU taxes on Chinese electric cars, disrupting global supply chains [176334]. European carmakers and electronics manufacturers warned they would have to halt production if the controls continued [176334].
China now controls 70% of global rare-earth mining and 90% of processing capacity, giving it significant leverage over industries that rely on these materials for high-tech products like magnets, electric vehicle motors, and military equipment [176334]. The G7 countries—the U.S., Japan, Germany, the UK, France, Italy, and Canada—have agreed that no country should control more than 60% of their rare-earth imports by 2030, a direct message to Beijing [176334].
The impact is already rippling through supply chains. Japan’s top chipmaking equipment suppliers reported a 10% drop in sales to China, citing tighter export controls and reduced demand from Chinese manufacturers [178865]. Analysts say ongoing geopolitical tensions and new trade restrictions are reshaping global supply chains, potentially signaling a further slowdown in China’s domestic chip production [178865].
The U.S. has also acknowledged its own failures. William Kimmitt, the U.S. under secretary of commerce for international trade, directly criticized China’s trade tactics on Thursday while blaming Washington for years of inaction, accusing the U.S. of being “asleep at the wheel for far too long” [176672]. He said Beijing “subsidized, they dumped, they erected regulatory barriers, they supported state-owned enterprises” to capture more of the American market [176672].