Highlights

• China's new export controls target 12 of 17 rare earth elements.
• Significant implications for global defense and technology industries.
• Immediate leverage lies with China, controlling approximately 90% of rare earth processing.
• China is implementing FDPR-style extraterritorial licensing requirements.
• Long-term outcome depends on Western investment in mine-to-magnet redundancy.
• Alternative supply chain development is crucial for the long-term outcome.

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CNBC (opens in a new tab) captures the headline truths: Beijing just tightened rare-earth controls, set to take effect Dec. 1, and Washington is weighing tariff escalation in response. It also notes China’s dominant position in the chain—correct in spirit, though the more precise framing is that China processes ~90% of rare earths and magnets, and is expanding restrictions to 12 of 17 elements, plus key equipment and materials.

See President Trump’s post via Truth Social (opens in a new tab).

Oversimplification

CNBC’s shorthand—“controls ~70% of global supply”—blurs an important distinction between mining share and processing/refining dominance. The new rules bite hardest because of China’s processing choke-point and a novel, FDPR-style reach: foreign producers using Chinese materials or equipment now face Chinese licensing—even abroad. That extraterritorial twist, plus explicit scrutiny of defense and advanced chips/AI, is central to Beijing’s leverage and deserves more emphasis than a raw “% share” stat.

President Trump’s Truth Social Post

President Trump says China sent “letters… to Countries throughout the World” to impose controls on “each and every element of production… even if it’s not manufactured in China.” The actual measures require licenses for products containing Chinese rare earths or made with Chinese mining/refining/magnet tech, typically above a 0.1% heavy-REE threshold—a sweeping claim, yes, but not literally “everything,” and not untethered from Chinese content/technology. He’s also right that this could “clog the markets,” as similar curbs earlier this year triggered shortages and production halts within weeks. But the contention that the move “came out of nowhere” ignores the April round of controls and months of signaling.

Trump’s threat of a “massive increase of Tariffs” is consistent with his tariff doctrine, but the post’s boast that the U.S. holds “two” monopolies for every Chinese one is rhetoric, not reality: in rare earths and sintered magnets, the U.S. starts from a thin industrial base and multi-year build-out timeline. Markets reacted to his post and the policy risk, but tariffs can’t conjure near-term material or processing capacity.

Where the Leverage Really Lies

Time Horizon	Primary Leverage Holder	Strategic Dynamics & Implications
Near Term (0–6 months)	China	Beijing’s new export regime immediately constrains materials, magnets, refining equipment, and even foreign re-exports tied to Chinese technology—precisely where alternative supply is scarcest. License denials for defense and case-by-case reviews for advanced semiconductors/AI amplify leverage ahead of talks. Enforcement abroad remains murky, but the risk alone chills financing and trade flows.
Medium Term (6–24 months)	Mutual Pain, Incremental U.S./Allied Gains	Tariffs and countersanctions drive up global costs. Meanwhile, the U.S., EU, Japan, and Korea sprint to stockpile, recycle, qualify substitutes, and build onshore separation capacity. Heavy-REE availability (Dy, Tb, Sm) still centers on China, so U.S. leverage from tariffs remains financial, not material—unless Beijing overplays its hand and pushes customers into permanent non-China contracts.
Longer Term (2–5 years)	Contested – Race for Redundancy	The outcome hinges on whether the West fully funds mine-to-magnet redundancy. The West and Trump need to follow the lead delineated in Rare Earth Exchanges (REEx). If successful, China’s dominance erodes; if not, its FDPR-style controls become a permanent regulatory valve over Western defense and EV supply chains. For now, Beijing still controls the critical midstream, where refining, alloying, and magnet fabrication converge.

What to Watch

1. License behavior (defense, advanced chips/AI): approvals vs. denials.
2. Allied policy coordination (EU/Japan/Korea) to reduce Chinese content in magnets and catalysts.
3. Deal signals before Dec. 1—any carve-outs or humanitarian/industrial exceptions.
4. Market stress: magnet and heavy-REE prices; production pauses.

Bottom line

CNBC’s core is sound, but too broad-brush. Trump’s post mixes valid urgency with exaggeration. In the run-up to talks, China holds more immediate, material leverage; the U.S. wields financial and regulatory tools. The scoreboard flips only if Western mine-to-magnet capacity (and substitutes) arrive faster than politics escalates. And for the roadmap and conditions for that to happen—study REEX and call for a critical mineral and REE industrial policy—we delineate how to make that happen, so study our content for the answer.

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