Eagle Intelligence Reports
In further extending its hold over critical technologies, China deepened its control over the rare earth sector earlier this month, broadening restrictions from raw materials to critical processing and manufacturing technologies. Citing the need to safeguard national security interests, Beijing imposed a stringent export licensing regime on technologies related to the entire rare earth value chain, including the technical know-how for mining, smelting, separation, and, critically, magnetic material manufacturing.
The controls explicitly target the use of Chinese rare earths and related technology in foreign military supply chains, stating that applications destined for overseas military users will generally be denied, and even foreign-made magnets that contain trace amounts of Chinese-origin rare earths or that utilize Chinese processing technology are subject to the new licensing requirements. This move effectively weaponizes China’s near-monopoly on the sophisticated separation and processing techniques essential for high-performance rare earth products.
Washington pushed back against Beijing’s rare earth measures. In a statement, US President Donald Trump said that “very strange things” are happening in China, which is becoming “very hostile” by imposing export controls on rare earth. He said that the measure will “clog” the markets and make life difficult for every country in the world, especially for China, and that there seems to be no reason to meet with Chinese President Xi Jinping at the anticipated bilateral summit at the APEC Summit scheduled later this month in South Korea. Trump also threatened that Washington would put a 100% tariff on China as a response.
After Trump’s initial comments, he repeatedly shifted his stance regarding the meeting with Xi Jinping in the days that followed. Having first said there was “no reason to meet,” Trump later expressed a desire for “a productive and constructive conversation,” adding further ambiguity to Washington’s position. He then issued a new warning that if trade negotiations failed to reach an agreement by November 1, he would issue a proclamation raising tariffs on Chinese imports to 155%. This reflected one of Trump’s characteristic tactics of using unpredictability as leverage, turning tariff threats into a negotiating instrument ahead of his potential talks with Xi at the APEC Summit in South Korea.
China’s expanded export controls on technology and expertise, beyond just minerals, will accelerate global supply chain bifurcation and heighten geopolitical tensions. This directly threatens the ability of foreign companies, especially US and European ones, to establish independent “mine-to-magnet” supply chains, where the defense industry, critical for the US and its allies’ military and security cooperation against China, would face case-by-case government review for license applications.
China’s expanded export controls on technology and expertise, beyond just minerals, will accelerate global supply chain bifurcation and heighten geopolitical tensions
The new export control rules that any foreign entities must now obtain a license from Beijing to export any products containing over 0.1% of domestically-sourced rare earths, or manufactured using China’s extraction, refining, magnet-making or recycling technology. Announced on October 9, 2025, the move triggered an immediate diplomatic backlash between October 12 and 16, as US and Chinese officials exchanged sharp statements ahead of the APEC Summit in South Korea.
According to the Chinese Ministry of Commerce, to prevent the “misuse” of rare-earth minerals in the military and other sensitive sectors, companies tied to foreign militaries or placed on export-control or watch lists, as well as any applications for items that could be used in weaponry, terrorism or other military purposes, will be denied permits.
The controls are specifically designed to be an instrument of strategic denial. The new rules expand the scope of control to an extraterritorial degree, effectively extending their reach beyond China’s borders in a manner functionally similar to the US Foreign Direct Product Rule (FDPR). This forces foreign companies, including key US defense suppliers operating abroad, to seek Chinese approval for any rare earth magnet or component that contains even a trace amount of Chinese-origin material or was produced using Chinese processing technology. By controlling the essential inputs and technology for their refinement, Beijing targets the most vulnerable link in the US military supply chain.
The new measures are poised to significantly disrupt US weapons production, which is heavily reliant on Chinese-processed rare earths and magnets. The new restriction follows the measure from April that placed seven categories of medium and heavy rare earths – samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium-related items – on an export control list following the Trump administration’s “reciprocal tariff” on China. In October 2025, Beijing further expanded the list to include holmium, erbium, thulium, europium, and ytterbium, alongside tighter restrictions on magnet-making and recycling technologies.
The rare earths are a group of 17 elements with unique properties that have become vital to several industries, including defense, electric vehicles, energy, and electronics. Contrary to what their name suggests, these minerals are relatively abundant. Their extraction and refinement, however, are complex and environmentally challenging.
These materials are foundational to mission-critical military components, including high-performance magnets, such as Samarium-Cobalt, which is essential for missile guidance systems and high-heat applications like missile nose cones and specialty alloys. Key US defense platforms are profoundly dependent on these elements, including the F-35 fighter jet, Tomahawk missiles, and naval vessels like the Arleigh Burke-class destroyer and Virginia-class submarines.
By restricting the flow of both finished magnets and the technology to make them, China creates immediate risks of production delays, escalating costs, and potential capability gaps for defense contractors like Lockheed Martin and Northrop Grumman, and severely constrains the US’s ability to rapidly scale or even sustain the manufacturing of advanced military hardware.
By restricting the flow of both finished magnets and the technology to make them, China creates immediate risks of production delays, escalating costs, and potential capability gaps for defense contractors
In the long term, these export controls threaten to widen the technological and military advantage gap. China’s dominance in processing—holding over 90% of global capacity—means that simply mining REEs elsewhere is insufficient, as the materials must still be refined and turned into finished products using controlled Chinese technology.
While the US Department of Defense has initiated multi-million-dollar investments aimed at developing a complete, independent “mine-to-magnet” domestic supply chain by 2027, these processes will take years to achieve full operational capacity, which would restrain Washington’s ability to ramp up its comparative military advantages against China.
However, Chinese state media consistently framed the rare earth export controls, announced in October 2025, not as an escalation or economic coercion, but as a “lawful, rules-based export control system” sovereign defensive act. Official outlets like the Global Times and Xinhua News Agency emphasize that the measures are “export control,” not “export prohibition,” assuring global markets that compliant applications for civilian use will be granted licenses.
The political calculation behind China’s announcement of expanded rare earth controls in October 2025—just weeks before the scheduled meeting between Presidents Xi Jinping and Donald Trump at the APEC Summit in South Korea—is centered entirely on maximizing negotiating leverage. China’s leadership recognized that its near-monopoly on rare earth processing is its most potent economic chokehold against Washington, which had recently escalated restrictions on Chinese technology firms, particularly in the advanced semiconductor and AI sectors.
By announcing the new rules—which target the US defense industry and apply extraterritorial control over foreign-made products—Beijing was deliberately pre-positioning its strategic bargaining chip ahead of the high-stakes talks. Moreover, by focusing the new controls on the technology and military end-users, Beijing could frame the move as a national security measure for the domestic audience, mirroring Washington’s own rationale for chip curbs and tariffs, while applying intense pressure on key US industrial sectors.
The delayed implementation of the new rules on the export of rare earth materials, set to take effect on December 1, further indicates that the controls are primarily an instrument of diplomatic pressure, offering a window for a negotiated reversal at the APEC summit. This calculated escalation serves to both solidify China’s dominance over the global supply chain of REEs and signal to the US that any future attempts to contain China’s technological rise will be met with a reciprocal and highly effective disruption of America’s own most vital industrial bases.
China’s expansion of rare earth technology controls is a direct and strategic reciprocal tit-for-tat response to the United States’ escalating restrictions on the semiconductor industry. Since October 2022, the US has systematically implemented and expanded export controls—including the FDPR—to deny China access to advanced semiconductors and chipmaking technology. The US controls utilize a key chokehold in the global supply chain—the American dominance over chip design tools, manufacturing equipment, and intellectual property.
China’s retaliatory action is a mirror-image strategy: it uses its own chokehold—its near-monopoly on rare earth processing and magnet technology—to target critical US industries, especially defense and advanced manufacturing. Beijing’s previous retaliations on critical minerals—such as on gallium and germanium—foreshadowed this move, but the new rare earth measures represent the most forceful upstream countermeasure yet, targeting the raw inputs and the know-how that underpin US technological supremacy.
This creates a temporal asymmetry of impact: while US semiconductor controls impose long-term technological bottlenecks on China, Beijing’s rare earth restrictions generate immediate operational pressure on US defense supply chains, affecting production timelines and cost structures.
The scope of the two respective restrictions targets opposing ends of the high-tech defense supply chain. The US semiconductor sanctions focus on upstream, cutting-edge technology essential for AI, supercomputing, and next-generation military planning in China. The impact on the Chinese defense sector is a long-term technological containment—creating severe bottlenecks, equipment shortages, and limited yields for advanced chips, which restricts China’s ability to domestically produce state-of-the-art guided munitions, autonomous systems, and advanced radar.
In contrast, China’s rare earth controls focus on downstream, foundational materials and manufacturing know-how—rare earth magnets and processing technology—essential for nearly all modern US defense platforms. China’s move has a more direct and immediate operational impact, with explicit denial of export licenses for overseas military users, forcing US defense contractors to urgently re-engineer supply chains for vital components in key weapon systems.
China’s move has a more direct and immediate operational impact, with explicit denial of export licenses for overseas military users
This escalating dynamic perfectly illustrates the concept of “armed interdependence”, where two interdependent nations weaponize the asymmetric vulnerabilities in their trade relationship. The US is strategically dependent on China for refined rare earth elements, while China is strategically dependent on the US and its allies for advanced semiconductor technology, especially for AI and computing. By applying an extraterritorial licensing framework that effectively mimics the FDPR, Beijing is asserting its ability to disrupt American supply chains from the bottom up.
This mutual weaponization ensures that every move to restrict one country’s access to a critical technology will be answered with an equally damaging restriction on the other’s access to a critical resource, raising the cost and risk of the technological decoupling strategy for both superpowers.
Beijing is utilizing the expansion of rare earth technology controls as a highly visible declaration of strategic confidence—a demonstration that it possesses a unique, structural source of geopolitical power that directly counters US technological dominance. This confidence is rooted in its decisive control over the entire rare earth value chain, where it accounts for approximately 90% of global processing and magnet manufacturing.
By applying an extraterritorial licensing regime, China is effectively extending its regulatory authority beyond its borders, compelling foreign companies worldwide to comply with Chinese national security interests. This move projects an image of a confident global power that is no longer content to merely be a recipient of technology but is actively defining the rules of the road for critical inputs. It sends the message to Washington that while Western countries may control the digital frontier of chips, Beijing is the one that controls the physical materials and industrial know-how that underpin all the advanced technologies.
By applying an extraterritorial licensing regime, China is effectively extending its regulatory authority beyond its borders, compelling foreign companies worldwide to comply with Chinese national security interests
These actions demonstrate Beijing’s calculated intent to leverage its domestic industrial dominance to shape the global competitive landscape. By making the supply of critical materials inherently uncertain and costly for adversaries, China forces Western governments to expend billions on building entirely new, domestically controlled supply chains, which not only solidifies China’s current market power but also projects a long-term strategic confidence in its ability to dictate the terms of engagement in the great power competition. This assertive strategy will likely continue to reshape global trade dynamics and accelerate the decoupling of strategic industries for years to come.
Control of fundamental materials has entered as one of the new forms of geopolitical rivalry. In this context, Beijing’s strategy of investing in the processing of rare materials, as opposed to merely mining them, illustrates the new frontier of geopolitical competition.
The most visible immediate reaction will be an escalatory, tit-for-tat trade penalty, as partially evidenced by President Trump’s threat of 155% tariffs on all Chinese imports. The US will aim to rapidly create reciprocal pain by using its own leverage to compel China to the negotiating table at the upcoming APEC summit, where the goal will be a transactional truce that secures a temporary resumption of export license approvals for US military and high-tech civilian firms.
The long-term and most fundamental response involves treating the supply chain threat as a national security crisis, leading to a massive, non-market injection of capital to create a domestic, independent “mine-to-magnet” ecosystem. The US government will utilize the Defense Production Act (DPA) and other funding mechanisms to aggressively subsidize and fast-track the construction of heavy rare earth separation and magnet manufacturing facilities on US territory, while simultaneously funding R&D to acquire the proprietary processing know-how that China has restricted.
Another strategic reaction will be the aggressive pursuit of “friend-shoring” the rare earth supply chain by solidifying partnerships with allies like Australia and Canada, providing financing and long-term contracts for their rare earth projects. Furthermore, significant federal funding will be channeled into research programs aimed at material substitution—developing high-performance, non-rare earth alternatives for critical components in the defense industry—and expanding recycling and “urban mining” initiatives to reduce structural dependence on China’s primary supply chain altogether.
A significant advancement supporting this strategy came when President Trump and Australian Prime Minister Anthony Albanese signed a critical minerals agreement at the White House. Valued at up to $8.5 billion in projects, the deal underscores Washington’s determination to secure alternative sources of rare earths and reduce its strategic dependence on China.