The Escalation of Rare Earths between China and USA

[John]

I might put up a separate thread on the history of China's dominance in rare earths.
But if we look at the actions and reactions since the first Trump administration (about 2018) till now, there are some themes coming out.

But first let’s look at what has happened since 2018:

Phase​	U.S. Actions​	China’s Response​
2018–2020	Trump tariffs on $360B of goods	Signalling RE leverage, WTO complaints
2021–2022	Biden maintains tariffs, adds tech bans	Administrative tightening, minor reforms
2023	New Biden tariffs on critical minerals	Tech export bans (magnet/refining IP)
2024–2025	100%+ tariffs on EVs, RE magnets	Export controls on HREEs, magnets

There is are some clear escalation themes:

• China exerting its asymmetrical leverage on Rare Earths.
• USA chose not to impose tariffs on rare earths coming from China — even though it heavily tariffed other Chinese goods like semiconductors, EVs, and steel. It is a deliberate strategic choice to avoid hurting its own economy and defence sector.
• China's action is a calculated geoeconomic escalation, signalling: “Even if you don’t target our REEs, we’ll use them to hit your strategic industries.”

So where is all this going?

My thoughts are that:

• This escalation in rare earths has been trending up since 2018. So i think that will continue.
• Xi Jinping won’t back down on rare earth restrictions — even if they cause market damage — because:
  • It would be seen as weakness.
  • It contradicts his powerful, self-reliant China vision.
  • It would undermine nationalist support and party legitimacy.
  • And he sees rare earths as a bargaining chip too valuable to give up lightly.
• Trump is the hard one to work out. There are really two options I think he would persue:
  • The Deal Option - I can see Trump trying to do a deal with China, where he pulls off the tariffs, but makes sure China's rare earths are plentiful for the USA for the next 10 years, whilst also investing heavily in Ex-China supply of rare earths, processing and end product supply chains.
  • The No Deal Option - He uses this to accelerate the creation of an Ex-China supply of rare earths, processing and end product supply chains.
• So for trump, he could try to fix the problem the slow, less painful way under 'The Deal Option' or he goes the agressive 'No Deal Option', with short term pain for a quicker gain.
• AND Trump and his advisers could go the No Deal Option and limit the downside effects by investing billions into the USA Allies (like Australia) to create the mine to magnet supply chains. There are at least three Rare Earth mines ready in Australia ready to be built....they just need finance...and for USA....it is the quickest way to set up an Ex-China rare earth supply chain.

What do others think? What will Trump and Xi do next?