China’s dominance in rare earth elements (REEs) and critical minerals is being strategically utilized to influence global industrial networks. With Chinese firms controlling over 90% of the world’s rare earth processing capacity, they have wielded this power by restricting exports, affecting industries worldwide. For instance, the withholding of rare metal magnets by China led to adjustments in US tariff policies under President Donald Trump.
This strategic economic approach by China involves the use of export controls not just for commercial purposes but as tools to exert influence on other countries. The impact of these actions has been tangible, causing disruptions in industries across the US, Europe, and allied nations. Companies have had to rethink their production strategies, while governments have scrambled to find alternative sources due to uncertainties in accessing rare earth materials.
The European Union Chamber of Commerce reported that a significant number of EU companies in China have reconsidered their supply chains due to unpredictable export policies. Similarly, various sectors in the US, including automotive and defense, have felt the effects of Beijing’s regulatory measures, highlighting the vulnerabilities that persist despite prior policy attention. This strategic use of export controls is part of a broader concept known as “weaponized interdependence,” where economic networks are manipulated for strategic advantage.
