https://www.nationalreview.com/2025/06/the-wrong-way-to-handle-the-china-threat/
The Wrong Way to Handle the China Threat
By The Editors
June 12, 2025
President Trump understands the seriousness of the threat that China poses to the U.S. and understands, too, how America’s unhealthy dependence on China across wide swaths of the economy compounds that threat. But he has not properly thought through how to address it.
Declaring a trade “war” against most of the world at the same time as taking on Beijing reveals reckless overconfidence, misplaced priorities, or both. This war will hurt the U.S. economy more than it helps it. That’s a win for China. It has antagonized allies and potential allies. Confronted with “liberation day,” some waverers may calculate that China is the more reliable partner or, even, that they have no choice other than to kowtow.
The recent announcement of a somewhat hazy deal suggests that the administration also failed to consider who, to borrow a fashionable metaphor, holds which cards. One of China’s strongest cards is the position that it holds in the rare-earth market.
Rare earths are metals that have certain properties that render them indispensable in various electronic and high-tech applications, from electric vehicle engines to the motors that power a drone and the sensors that help them “see.” Notwithstanding their name, they are not particularly rare. Finding them in a form sufficiently concentrated (they are typically found within other minerals, rather than in “standalone” form) to make them worth extracting is more difficult. China is thought to have nearly 40 percent of the world’s usable reserves and to account for 60–70 percent of rare-earth production, and perhaps 90 percent of rare-earth processing (the percentage varies with the metal).
China has been restricting exports of a number of (“dual use”) rare earths, including, critically, rare-earth magnets, which have both civilian and military applications. Pleading security considerations, Beijing denies that these curbs relate to the Trump tariffs (they apply, in theory, globally), but the two issues are clearly connected. What matters is that Beijing is demonstrating that it has this card and is willing to play it.
The result has been consternation in the auto sector (not only EVs are affected), with supplies running low. Suzuki and, reportedly, Ford have already had to shut down some production because of rare-earth shortages. There are probably other examples. At talks in London on Wednesday, negotiators from the U.S. and China tentatively agreed to a truce. China will resume approving the necessary rare-earth export licenses to U.S. manufacturers (but only for six months), and the U.S. will reverse recent export restrictions of ethane (needed by China’s plastics sector), jet engines, and some other machinery. The U.S. will again admit Chinese students. The tariff truce (which leaves tariffs on Chinese imports — sorry, doll buyers — at 55 percent) is to continue at least until August.
The result is, at best, a temporary reprieve snatched out of defeat. For reasons too obvious to need explaining (and with which Adam Smith would have agreed), the U.S. should never have allowed itself to become dependent on its main strategic rival for such vital material. But it did, and so the administration has had no alternative to entering an agreement that, even if it comes into full force, leaves a sword of Damocles, fashioned out of rare earth, hanging over Uncle Sam’s head. Such is the price to be paid for entering into a test of strength with a formidable adversary without doing the necessary groundwork first. The rare-earth vulnerability was hardly a secret.
There is no quick fix. The Chinese regime will not release enough rare earths to permit any significant stockpiles to be built up over here. For now, all that can be done is to look for alternative sources of supply — even if the immediate pickings are both slim and expensive. Looking further ahead, the current squeeze will encourage businesses to look for alternative technologies. This should include a major effort to make it less difficult to recycle rare earths.
In the end, however, there is no alternative other than to expedite rare-earth mining and processing here in the U.S., and, given today’s geopolitics, at warp speed. Scrapping the IRA’s subsidies could, perhaps, help fund this, although today’s circumstances are such that the private sector will have every incentive to get to work once regulatory brakes are relaxed. Environmentalists will object, but freedom is not always pollution-free.
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