Highlights

• A new LSE commentary argues China 'neutralized' the U.S. in 2025 through asymmetric economic strategy, particularly rare earth leverage and agricultural retaliation, but the narrative overstates the actual market impact.
• While China maintains 90% control of rare earth processing and tightened export controls, no actual supply collapse occurred—markets tightened but U.S. defense production continued without acute shortages.
• The analysis omits key U.S. countermeasures including:
  • DoD price floors
  • Strategic equity stakes in MP Materials and others
  • Advancing heavy rare-earth element (REE) projects across Australia, Japan, Canada, and the EU

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A new London School of Economics (LSE) commentary (opens in a new tab) by Georgio Moussa argues that the United States did not win the 2025 U.S.–China trade confrontation, but instead was “neutralized” by China’s asymmetric economic strategy—chief among them rare earth leverage and targeted retaliation. It is a sweeping geopolitical narrative, rich in drama and political implications. But for investors, policymakers, and supply-chain operators, the key question is simpler: How much of this aligns with what actually happened in the rare earth market?

The Rhetoric: A Grand Tale of Defeat

Moussa frames the 2025 escalation as Washington overplaying a blunt instrument—tariffs—while Beijing responded with precision. The blog casts China’s dominance in rare earths and its calibrated retaliation (including soybeans) as decisive tools that forced the United States into a negotiated stalemate in South Korea.

The narrative is engaging and sharply written. But it reads more like a geopolitical briefing than a detailed account of what unfolded within the rare earth supply chain itself.

The Materials: What’s Fact and What’s Flourish?

Fact: China’s Rare Earth Dominance Remains Structural

Moussa correctly notes that China retains overwhelming control of global rare earth processing—around 90%—and that its 2025 regulatory tightening on magnet technologies and export licensing rattled Western defense and EV manufacturers. His references to F-35 and naval REE requirements track with Pentagon data: heavy rare earths remain a critical vulnerability.

Fact: Agricultural retaliation has long been Beijing’s pressure point

The soybean pressure campaign—revived in 2025—is consistent with past trade conflicts and accurately described in the blog.

Flourish: A Rare Earth “Chokehold” That Never Fully Landed

The LSE piece implies China unleashed or nearly unleashed a full-spectrum rare earth cutoff. In reality, China escalated controls, but did not halt exports of NdPr, Dy, or Tb during the 2025 confrontation. Markets tightened; they did not collapse. No collapse of U.S. defense production occurred, nor did the Pentagon report acute shortages.

Flourish: A “Decisive Neutralization” of U.S. Economic Power

Moussa argues that tariffs failed and U.S. power was exposed. But he omits a parallel story:

• DoD price floors for magnet materials
• equity stakes in MP Materials, Lithium Americas, Vulcan/ReElement
• heavy-REE projects advancing in Australia, Japan, Canada, and the EU

Washington did not rely on tariffs alone, and Beijing did not walk away with an uncontested strategic victory.

Why Investors Should Care

The value of Moussa’s piece is not its verdict, but its signal: rare earths remain the highest-leverage node in China’s asymmetric economic arsenal, and analysts worldwide are now openly framing them as such. That perception—accurate or overstated—shapes policy, defense funding, stock valuations, and the speed of Western supply-chain diversification.

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