Rare earth minerals, augmented alongside President Trump’s targeting of Beijing’s weaknesses could force concessions from the Chinese government.
China has intensified its trade war with the United States by imposing a sweeping ban on rare earth exports and disrupting global supply chains critical for electric vehicles, wind turbines, and military technology. These minerals are the lifeblood of modern innovation, and Beijing’s decision to weaponize its dominance aims to pressure Washington into concessions. Yet this high-stakes move raises a critical question: Is China overestimating its economic resilience?
The ban risks destabilizing its own economy, which relies heavily on exports, and could provoke a broader backlash from Western powers. As the trade war escalates, the global balance of power hangs in the balance, with both sides testing each other’s endurance.
The U.S.-China trade conflict is at a fever pitch. American tariffs on Chinese imports have soared to 145%, a formidable barrier designed to curb Beijing’s economic influence and protect domestic industries. In response, China’s export restriction, implemented on April 4, has drastically reduced rare earth shipments, posing a threat to global industries. This escalation could prove self-destructive for China, where exports account for nineteen percent of GDP and sustain over 150 million jobs, directly or indirectly. This economic engine, fueled by a mercantilist strategy of currency manipulation, capital controls, and intellectual property theft, generates a $1 trillion annual trade surplus—equivalent to one percent of global economic output. By jeopardizing this lifeline, Beijing is gambling with its economic stability and global standing.
Beijing’s Global Trade Ambitions
China’s economic nationalism extends far beyond its rivalry with the United States, targeting the entire Western world. European nations have long contended with Beijing’s aggressive trade practices, from flooding markets with subsidized goods to exploiting regulatory loopholes. Yet Western narratives often portray President Trump’s trade policies as impulsive, while China’s leadership is framed as strategic and composed, the victim of American overreach. This glosses over Beijing’s mismanagement, particularly its role in the collapse of its real estate sector, which once represented seven percent of global assets.
The property market, a pillar of social stability amid high youth unemployment, created millions of vacant homes. Its implosion has forced China to prioritize exports while launching the “Dual Circulation” initiative to bolster domestic consumption—a contradictory and ambitious goal. Official reports claim 5.4% GDP growth in the first quarter, but a 3.5% tax revenue drop suggests manipulated figures. If so, this shows the weakness of China’s economic narrative and has produced question marks about its long-term trajectory.
Targeting China’s Economic Core
Trump’s administration has honed in on China’s export-driven economy, a vulnerability Beijing has consistently underestimated. The U.S. tariff wall, now resembling an embargo, is a calculated effort to disrupt China’s growth model and rebalance global power dynamics.
This strategy counters Beijing’s expansive geopolitical agenda, from securing influence over strategic infrastructure to its Belt and Road Initiative, a sprawling network of projects critics describe as soft colonialism, underpinned by domestic repression against groups like Tibetans and Uyghurs. China’s moral posturing against U.S. trade tactics rings hollow given its human rights record, which undercuts its credibility on the global stage.
The trade war’s fallout could ripple worldwide, particularly if China’s export sector faces mass layoffs and social unrest. Redirecting goods to other markets is uncertain, as Europe, a frequent target for Chinese overproduction, has a history of swiftly erecting barriers to protect its internal market. The risk of exporting China’s economic woes looms large, especially if Beijing misjudges Europe’s willingness to absorb its surplus goods.
Breaking China’s Rare Earth Dominance
To dismantle China’s control over rare earths— seventy percent of global production and eighty percent of processing—the United States is taking bold steps. On March 20, Trump issued an executive order to expand American mineral production, invoking the Defense Production Act and declaring a national energy emergency. This policy slashes regulatory hurdles and incentivizes private investment in domestic mining, aiming to reduce dependence on foreign supplies. The United States is also pursuing alternative sources by negotiating access to Ukraine’s rare earth reserves and exploring Greenland’s vast deposits, which are among the largest globally. Australia, exempt from U.S. tariffs, is poised to become a critical supplier, strengthening its role as a geopolitical ally.
These efforts, complemented by EU and Australian initiatives, seek to erode China’s stranglehold on this vital resource. The U.S. is embedding its trade strategy within a broader industrial revival, with Apple’s $500 billion domestic investment, alongside commitments from TSMC and Stellantis, signaling a tariff-driven wave of onshoring that has the goal of reawakening American manufacturing and augmenting economic sovereignty.
Geopolitical Maneuvering and Risks
The global geopolitical landscape is increasingly volatile. A potential U.S.-Russia collaboration on rare earths, while hypothetical, seems feasible given improving relations and America’s increasing withdrawal from Ukraine. Such an alliance could significantly weaken China’s leverage, but it would also strain Moscow’s deepening relationship with Beijing, particularly in the fields of energy and raw materials. China’s reliance on Russian resources adds another layer of complexity, as Beijing’s economic vulnerabilities could be exploited by shifting alliances.
The trade war’s resolution depends on stamina: Which nation can endure the most economic hardship? China’s authoritarian system, despite its tight control, faces mounting pressures from a deflating economy, rising social unrest, and the limits of its centralized model. Western democracies, for all their turbulence, may prove more resilient, with their openness and adaptability offering a structural advantage. Trump’s unrelenting focus on China’s weak spots—its export dependence and fragile domestic stability—could force Beijing to make concessions. A deep economic crisis, exacerbated by deflationary trends, is a scenario China’s leadership cannot afford, as it risks undermining the Communist Party’s legitimacy.
The broader question is one of systemic strength. Can Western democracies, with their flexibility and accountability, outlast China’s rigid authoritarianism? The allure of centralized control may falter under the weight of economic realities, particularly as China’s mercantilist strategy strains under global push-back. As the trade conflict intensifies, Trump’s targeting of Beijing’s weaknesses could force concessions, revealing the constraints of China’s economic goals and redefining the global order to prioritize resilience over dominance.
Thomas Kolbe is a graduate economist. For over twenty-five years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.
Image: Shutterstock/Ivan MarcR
