Highlights

• China has shifted from WTO-regulated export restrictions to strategic export controls on rare earth processing, controlling 90% of global REE separation while using licensing requirements to pressure the U.S. without violating trade rules.
• U.S.-China decoupling is creating two parallel supply chains—a U.S.-aligned diversification network and a China-centered bloc—fundamentally reshaping semiconductor, defense, and EV manufacturing at higher costs.
• Despite extensive U.S. diversification efforts including DOE grants and international partnerships, replacing China's rare earth processing monopoly remains impossible in the foreseeable future, making mineral security synonymous with national security.

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A sweeping new chapter by Dr. Umair Hafeez Ghori of Bond University, published in The Geo-Economic: US–China Decoupling and the Use of Export Controls on Semiconductors and Rare Earths (2025), delivers one of the clearest, most comprehensive explanations yet of how China’s control over rare earth element (REE) processing—and its growing use of export controls—has become a defining lever in global geopolitics.

Ghori, writing with a wide constellation of international economic, legal, and policy sources, argues that U.S.–China decoupling is no longer a theoretical possibility but the central organizing force shaping the future of semiconductor supply chains, REE access, and national security planning.

The core conclusion is stark: China’s monopoly on rare earth processing gives Beijing a unique coercive tool, and export controls are now being used with precision and restraint to influence U.S. behavior.

Study Methods: A Legal, Economic, and Policy Triangulation

Ghori’s chapter is based on a qualitative, analytical method that integrates trade law, WTO case history, U.S. and Chinese export-control statutes, and contemporary reporting from Reuters, CNN, and CSIS. The approach is descriptive but systematic: it traces how U.S. semiconductor export controls triggered China’s retaliatory export controls on gallium, germanium, graphite, tungsten, and, eventually, the heavy rare earths essential for jet engines, EV motors, satellites, and guided weapons.

Rather than relying on a single dataset, the study triangulates dozens of policy documents, WTO rulings, U.S. Commerce Department filings, and China’s emerging national security legislation. This method helps the lay reader see the full picture: REEs are no longer “just materials”—they are instruments of statecraft.

Key Findings: China’s Rare Earth Dominance Has Become a Strategic Weapon

1. Export Controls, Not Export Restrictions, Are China’s New Playbook

Ghori clarifies a vital distinction. Export restrictions (taxes, quotas, bans) fall under WTO oversight. They can be challenged. China lost major WTO cases in 2014 for restricting REE exports.

But _export controls_—which China now uses—are national-security measures. They fall outside WTO jurisdiction.

China has learned its lesson. Now, instead of banning exports outright, Beijing uses licensing, reporting requirements, and national-security classifications to “throttle” supply while avoiding formal trade violations.

2. China’s Monopoly Is Real—and It Is the Leverage Point

China controls 60–70% of global REE mining, but more importantly, over 90% of global REE separation, metal making, and magnet manufacturing.

Ghori shows this is the exact layer where China applied pressure: heavy REEs like Dy, Tb, Sm, and Y—materials the U.S. cannot easily substitute.

The result: when the U.S. imposed semiconductor restrictions, China responded by tightening export licensing on the very minerals the U.S. defense industrial base needs most.

3. U.S. Diversification Is Expanding, But It Is Slow and Expensive

The study documents dozens of U.S. efforts—DOE grants, Canada co-investments, MP Materials’ Saudi JV, Japanese agreements, recycling projects—but concludes none of these can replace China “in the foreseeable future.”

4. The Rise of Two Parallel Supply Chains

Ghori argues that decoupling is creating two new global blocs:

• U.S.–aligned chain: reshoring semiconductors, diversifying REEs, tightening tech controls.
• China-centered chain: leveraging REE dominance, vertically integrating EV, solar, and electronics production, and pursuing “dual circulation” to insulate its economy.

This, he writes, is “the new geo-economic reality.”

Implications: A Permanent Reshaping of Rare Earth Markets

For investors, policymakers, and industry leaders, the implications are enormous:

• Supply shocks will become policy tools. China’s targeted export controls were “warning shots,” not full embargoes—proof Beijing can calibrate pressure with surgical precision.
• Costs will rise. Parallel supply chains mean duplication, inefficiency, and higher prices for magnets, chips, batteries, and defense systems.
• Permitting and environmental constraints become geopolitical liabilities. To reduce dependence on China, the U.S. may need to relax environmental barriers that have long hampered REE processing.
• New players will emerge. Nations once locked in “resource traps”—Indonesia with nickel, Brazil with niobium, Vietnam with REEs—stand to benefit from U.S. diversification.

Limitations and Controversies

While extensive, the study carries several limitations as do most comparable studies:

• Qualitative bias: It synthesizes literature rather than generating new data.
• Focus on state behavior: Less attention is paid to private-sector capacity gaps.
• Uncertain trajectories: Export-control regimes shift quickly; the narrative is accurate today, but fluid.
• Underdeveloped environmental analysis: The costs of re-shoring REE processing in the U.S. are discussed only briefly.

Still, Ghori offers one of the clearest explanations yet of why REEs now sit at the center of global power competition.

Conclusion

Ghori’s chapter captures a turning point: the era of frictionless globalization is over, and rare earth elements—once obscure minerals known mainly to metallurgists—have become the hinge of global geopolitics. As the U.S. and China accelerate decoupling, export controls, not tariffs, are emerging as the true instruments of influence. For the rare earth sector, the message is unmistakable: supply chains will fragment, parallel systems will form, and mineral security is now national security.

Citation: Ghori, U.H. (2025). The Geo-Economic Fulcrum: US–China Decoupling and the Use of Export Controls on Semiconductors and Rare Earths. Chapter 9.

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