The West’s China Dependency Crisis Is No Longer Theoretical

Highlights

• Michael Kovrig's Foreign Affairs essay reveals how China weaponizes critical mineral dependencies while the West faces consequences of decades of industrial offshoring and manufacturing concentration in Chinese supply chains.
• China controls 90% of rare earth refining and NdFeB magnet production, using this dominance as geopolitical leverage through economic coercion against Australia, Japan, Lithuania, and other nations.
• The real investment question is whether the U.S., Europe, and allies can rebuild midstream processing capabilities—especially solvent extraction plants and metallization facilities—before the next geopolitical shock.

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A May 2026 Foreign Affairs essay (opens in a new tab) by former Canadian diplomat Michael Kovrig argues that Western leaders are drifting toward Beijing because of instability and unpredictability from Washington, a disturbing claim if true.  The piece correctly identifies China’s growing leverage through manufacturing dominance, critical mineral and rare earth element chokepoints, and strategic industrial policy. But it also contains selective framing and notable omissions about how deeply Western corporations and governments enabled China’s industrial rise over three decades. For investors, the real story is not diplomacy alone. It is the widening gap between geopolitical rhetoric and industrial capability. Source: Foreign Affairs article “Trump’s China Trap.”

Trump’s China Trap—or the West’s Industrial Trap?

The most revealing line in Michael Kovrig’s essay is not about Donald Trump. It is about dependence. Beneath the diplomatic choreography lies a harder reality: the West outsourced critical industrial capability to China for decades and is now discovering that trade relationships can become instruments of geopolitical leverage.

Kovrig correctly identifies Beijing’s core strategy. China has pursued industrial self-sufficiency while increasing foreign dependence on Chinese supply chains. That assessment aligns closely with Rare Earth Exchanges' tracking over the years across rare earths, graphite, battery materials, solar manufacturing, and permanent magnets.

China today controls roughly 90% of global rare earth refining and separation capacity and dominates NdFeB permanent magnet manufacturing. The article accurately notes Beijing’s willingness to weaponize trade access and critical mineral supply chains. Australia, Japan, Lithuania, South Korea, and Canada have all faced forms of Chinese economic coercion.

The Part the Essay Understates

What the article only partially confronts is the scale of the West’s industrial hollowing-out problem. Separation plants, metallization facilities, and magnet manufacturing ecosystems cannot be rebuilt quickly through summit meetings or subsidy announcements alone.

The real chokepoint is midstream processing. Solvent extraction—the dominant industrial method for rare earth separation—remains technically difficult, environmentally sensitive, and capital-intensive. China industrialized these capabilities over generations while much of the West prioritized financial efficiency and offshoring.

The essay also understates corporate agency. Many multinational firms actively concentrated manufacturing inside China to reduce costs and maximize shareholder returns. This was not simply geopolitical drift. It was deliberate economic optimization.

The Real Investor Question

What makes Kovrig’s essay notable is its implicit acknowledgment that critical minerals are now strategic leverage assets, not ordinary commodities. This, of course, fits into the Rare Earth Exchanges™ Great Powers Era 2.0 thesis. Rare earths, graphite, gallium, germanium, and magnets increasingly shape defense systems, robotics, EVs, AI infrastructure, and energy security.

But the piece occasionally veers toward strategic fatalism. China’s dominance is real, but not invulnerable. Beijing also faces slowing growth, mounting debt stress, demographic contraction, and rising global pushback against concentrated supply chain dependence. Rare Earth Exchanges has often reported overproduction crises as well as the lack of flexibility associated with an increasingly top-down, command-and-control structure.

For investors, the central question is not whether China dominates certain sectors such as critical minerals and rare earth elements. It clearly does. The question is whether the United States, Europe, Japan, Australia, and allied nations can rebuild industrial competence and supply chain resilience before the next geopolitical or trade shock arrives. 

Source: Michael Kovrig, “Trump’s China Trap: Why Xi Keeps Winning the Summitry Game,” Foreign Affairs, May 5, 2026.