Rare Earth War Again — The U.S.-China Game of Chicken Over China's Export Controls and "100% Tariffs"

On October 9-10 (local time), China further tightened export controls related to rare earths. The new announcement mandates approval from the Chinese government for overseas exports of "dual-use" items containing specific rare earth elements and magnetic materials. Notably, the framework resembles extraterritorial application, as products manufactured abroad could be subject to control if they contain Chinese-origin rare earths or magnetic materials【mofcom.gov.cn】.

The list of items now includes holmium, erbium, thulium, europium, ytterbium, among others, and final uses related to semiconductors, advanced AI, and military are subject to individual review【Reuters】. The Chinese side explained the purpose as "fulfilling national security and international non-proliferation obligations," stating that exports for humanitarian purposes may be exempt under certain conditions【InfoMoney】.

In response to this move, U.S. President Trump on October 10 hinted at a "significant tariff increase (including a 100% tariff proposal)." He also mentioned the possibility of canceling a planned meeting with Chinese President Xi Jinping at the APEC in South Korea two weeks later, posting, "There is no reason to meet"【Reuters】. The retaliatory tone of the remarks quickly chilled market sentiment, reportedly leading to a sharp decline in the U.S. stock market, led by tech【New York Post】.

Why are "rare earths" a critical point?

Rare earths underpin a wide range of strategic industries, including electric vehicle motors, wind power generation, smartphones, fiber optics, radar, precision-guided weapons, semiconductor manufacturing equipment, and even high-performance permanent magnets. In addition to mining share, China's dominance in refining, separation, and magnet processing has long been pointed out as a vulnerability due to dependency on China【The Guardian】. The new regulations extend control not only to the materials themselves but also to processing technologies and equipment, potentially creating new friction in supply chains by imposing brakes on **finished products "including Chinese origin"**.

Pre-APEC Maneuvering

The timing is symbolic. With the APEC summit in South Korea approaching, Beijing played the resource card, while Washington responded with the tariff card. Experts analyze that the additional regulations on rare earths and magnets pose a "new threat" to the U.S. defense supply chain【CSIS】. A UK think tank also warns that "the West should urgently build resilience"【chathamhouse.org】.

Initial Market Reaction

Major U.S. stock indices plummeted, with semiconductor and EV-related sectors heavily dependent on China being sold off, while U.S. rare earth-related stocks saw speculative buying【New York Post】. In the short term, volatility is expected to increase, and in the medium term, investment funds are likely to focus on **enhancing refining and magnet production capacity "outside China."**

Social Media Reaction: The Temperature Gap Between X and Weibo

On X (formerly Twitter), economic media and investor accounts posted concerns about "supply chain vulnerabilities" and "lack of alternative capabilities." Posts from major accounts reporting the news spread instantly, and the phrase "massive tariffs" trended【X (formerly Twitter)】. Meanwhile, on China's Weibo, narratives like "a natural negotiation card" and "creating equal competition conditions" were prominent, showing a defensive and nationalistic tone. Posts from official media received high engagement, and slogan-like hashtags such as **"未经许可不得为境外稀土开采提供实质帮助 (Do not provide substantial support for overseas rare earth mining without permission)" spread【weibo.com】. Prominent Chinese commentators also strongly supported the move, saying it "dealt a blow to the U.S.," enhancing domestic cohesion【【zaobao.com.sg】.

Industry Impact: Where Are the Bottlenecks?

• Semiconductors: The new rules specifically target advanced areas like logic below 14nm and memory with 256 layers or more. Delays in the supply of materials, equipment, and sputtering targets could affect equipment utilization rates and yield【mofcom.gov.cn】.

• High-performance magnets (NdFeB, etc.): Directly linked to powertrain and power generation efficiency in EV motors and wind power. Even if produced outside the region, the Chinese-origin ratio could impose restrictions, making raw material traceability an urgent task【Center for Security and Emerging Technology】.

• Defense and Space: The importance of rare earths in radar, guided weapons, and nuclear control materials is reaffirmed, likely leading to stockpiling and diversification of suppliers【Reuters】.

Policy Scenarios: Diverging Paths of Escalation

1. Gradual Tariff Implementation: If the Trump administration moves 100% tariffs from a "threat" to "actual implementation," it could coincide with rising prices of consumer and intermediate goods and delays in tech investment【The Washington Post】.

2. Limited Compromise: Around APEC, expanding exemption categories (medical, disaster) and focusing on categories with strong military-civilian dual-use concerns, a "narrow line of compromise". China's announcement leaves room for this【mofcom.gov.cn】.

3. Acceleration of Long-term Decoupling: The U.S., Europe, and Japan may move towards domestic refining, re-sourcing, and magnet processing, caught between rising costs and environmental regulations, leading to industrial restructuring. While policy investment may increase, it is widely believed that it will take a long time to completely replace China【m.weibo.cn】.

What's "New"?

While there have been rare earth regulations in the past, this time the "tightening" has evolved in three layers: **(1) expansion of target elements**, (2) detailed delineation of technology, equipment, and applications, and (3) impact on extraterritorial products. Although international legal debates remain, the practical burden on suppliers and procurement departments is certain. Compliance operations will need to be redesigned, including evidence management, COO (Country of Origin) determination, and calculating **"Chinese-origin content."**

Practical Advice for Companies (Checklist)

• Mapping BOM and Supply Chain: Prioritize inventory of rare earth-related components such as magnets, target materials, and flux.

• Traceability of Origin and Content: Prepare for potential extraterritorial application by securing supplier declarations and audit routes.

• Alternative Materials and Design: Utilize non-rare earth motors and recycled materials, and reset inventory safety levels.

• Regulation Watch: Track changes in the definition of individual review targets (advanced semiconductors, AI, military) and the operational record of medical and disaster exemptions.

Conclusion—This Is Not a "Sprint"

This exchange is not just a tit-for-tat battle. It marks the beginning of a long-term struggle where resources (rare earths) x technology (semiconductors, AI) x security (non-proliferation) are integrated. The pre-APEC tension is merely a rearrangement of negotiation cards. In the medium to long term, the question is who can build up the "processing, refining, and magnet" capabilities, which are unglamorous yet substantial. Reconstructing the supply chain will change the market landscape more slowly than political headlines, but surely.(Reference: Policy and factual information is based on announcements from the Chinese Ministry of Commerce