China has long indicated its intention to weaponise parts of the global supply chain—a strategy now visibly playing out through tighter control of rare earth exports. Modelled on longstanding US export restrictions that Beijing believes are designed to limit its technological rise, China is now turning similar tools to its own advantage.

The recent rush by companies to secure export licences for rare earth materials, culminating in a phone call between US President Donald Trump and Chinese President Xi Jinping on Thursday, highlights how Beijing has refined a powerful lever in the ongoing trade war.

Industry experts say China may approve more shipments in the near term but it has no plans to dismantle the new system underpinning those approvals.

Instead, China’s new export licensing regime, closely mirroring the US model grants the government deeper visibility into global supply chokepoints including critical sectors such as electric vehicle motors and precision systems used in missiles. This level of control offers Beijing a potent means to retaliate in the trade dispute while asserting dominance in strategically vital markets.

China sharpens rare earth export controls in trade war playbook

As relations between the two countries sour and supply chains fracture, both Washington and Beijing appear determined to shift from broad tariffs to more focused, technical barriers—ones that could have lasting implications for industries worldwide.

”China originally took inspiration for these export control methods from the comprehensive U.S. sanctions regime,” Zhu Junwei, a scholar at the Grandview Institution, a Beijing-based think tank focused on international relations told Reuters.

”China has been trying to build its own export control systems since then, to be used as a last resort.”

After a phone call with Chinese President Xi Jinping, President Trump said the two leaders were “straightening out some of the points,” particularly regarding rare earth magnets—key components in electric vehicle (EV) motors and high-tech weaponry. But Trump did not confirm whether Beijing had agreed to speed up export licensing, a sticking point since Washington imposed restrictions on chip design software and jet engines over what it calls China’s deliberate slow-walking of approvals.

China, which holds a near-monopoly on rare earth magnets, added some of the most advanced types to its export control list in April. The move forces all exporters to seek government licences before shipping these materials, turning a once-obscure division of the commerce ministry—staffed by around 60 people—into a powerful gatekeeper of global manufacturing.

The export curbs, part of a broader retaliation package against US tariffs, have had ripple effects well beyond the US. Several European auto parts manufacturers were forced to shut down production lines this week after exhausting their supply of rare earth magnets, underscoring the global reach of Beijing’s measures.

Though China’s commerce ministry has not publicly commented on the issue, analysts say the blanket controls offer Beijing both leverage in its trade war with Washington and a strategic tool to reshape global supply chains in its favour.

”Beijing has a degree of plausible deniability – no one can prove China is doing this on purpose,” Noah Barkin, senior adviser at Rhodium Group, a China-focused U.S. thinktank told Reuters.

”But the rate of approvals is a pretty clear signal that China is sending a message, exerting pressure to prevent trade negotiations with the U.S. leading to additional technology control.”

China mines about 70% of the world’s rare earths but maintains a near-monopoly on refining and processing, giving it a powerful position in global manufacturing. Even if export approvals accelerate, as U.S. President Donald Trump indicated after a call with President Xi Jinping, Beijing’s new licensing system offers it unprecedented visibility into how companies use these critical materials.

European and U.S. executives warn that by forcing exporters to apply for licences, China’s government can now closely monitor supplier chokepoints in sectors ranging from electric vehicles to advanced weaponry, oversight that other governments lack due to the complexity of global supply chains.

Hundreds of Japanese companies are expected to need Chinese export approvals for rare earth magnets in the coming weeks, a person lobbying on their behalf told Reuters. Without timely licences, they risk production disruptions, underscoring how Beijing’s new trade tools could reshape access to materials essential to modern industry.

”It’s sharpening China’s scalpel,” said a US-based executive at a company seeking to piece together an alternative supply chain who sought anonymity.

”It’s not a way to oversee the export of magnets, but a way to gain influence and advantage over America.”

China’s export controls deepen as fears grow over weaponisation of supply chain power

Fears that China could weaponise its dominance in critical supply chains first emerged in 2010, when it briefly halted rare earth exports to Japan during a territorial dispute. But those concerns have intensified in recent years as Beijing sharpens its trade tools and broadens export restrictions across strategic sectors.

As far back as 1992, former Chinese leader Deng Xiaoping noted, “The Middle East has oil, China has rare earths.” That sentiment has shaped policy: in 2020, China passed a sweeping Export Control Law allowing it to restrict exports of any items deemed vital to national security, including materials, technology and data.

Since then, China has built up its own sanctions arsenal in response to U.S. restrictions, investing heavily in alternative supply chains while tightening its grip on key exports. In 2022, the United States imposed broad curbs on chip and semiconductor tool exports to China, aiming to slow the country’s military and AI advancements. But analysts say Beijing has continued to make headway despite those barriers.

In retaliation, China has steadily expanded its export controls. Last year it imposed licensing requirements for gallium, germanium, and certain graphite products—vital inputs for defence, electronics, and green technologies. Shipments of these minerals to the U.S. were banned outright in December. Then in February, China added five more metals to its control list.

Now, following a phone call between Donald Trump and Xi Jinping, attention has turned to whether China will ease its latest rare earth export curbs. But analysts warn of a lack of transparency.

“It’s virtually impossible to know what percentage of requests for non-military end users get approved because the data is not public and companies don’t want to publicly confirm either way,” said Cory Combs, an analyst at China-focused consultancy Trivium.

The opaqueness of Beijing’s process and its expanding powers over chokepoint materials are reinforcing Western concerns that supply chains are becoming geopolitical battlegrounds.

With inputs from agencies