US and China deepen trade conflict over rare earths and battery materials amidst escalating tariffs

Tensions escalate as the US plans to impose a 100% tariff on Chinese imports, responding to China’s export restrictions on critical minerals vital for technology and clean energy sectors, signalling a potential reshaping of global supply chains.

Tensions between Washington and Beijing have sharply escalated with the latest round of trade and export controls focusing on rare earths and battery materials, critical components in modern technology and clean energy sec...

tors. President Donald Trump has announced plans to impose a 100% tariff on Chinese imports starting November 1, effectively doubling existing tariffs that already weigh heavily on Chinese goods. This move is a direct response to China’s decision to tighten export restrictions on rare earth technologies, lithium batteries, and graphite anode materials, effective November 8.

China’s Ministry of Commerce recently expanded controls that first targeted gallium, germanium, and advanced graphite earlier in the year, extending their reach over key minerals vital for both clean-energy manufacturing and defence applications. These restrictions have been viewed by the United States and its allies as an increasingly aggressive effort to weaponize resource exports amid a broader technology conflict.

President Trump took to Truth Social to accuse China of planning “large-scale export controls on virtually every product they make,” signalling increased friction. Additionally, the administration announced upcoming export restrictions on critical software, though details remain sparse.

The renewed trade hostilities follow a fragile and ultimately unsuccessful truce negotiated earlier in the year, during which a 90-day tariff freeze was extended through November 10 while talks aimed at a broader trade deal continued. Despite optimistic declarations from Trump that a deal was “done” pending approval by himself and President Xi Jinping, no formal agreement materialised. Trump’s recent statement that his planned meeting with Xi at next month’s APEC summit in South Korea is now off the table marks a significant deterioration in diplomatic engagement.

The impact of these developments is expected to be profound, particularly for sectors reliant on Chinese supply chains for electronics, electric vehicle (EV) batteries, and renewable technology components. Industry analysts note that China’s dominance in refining and processing critical minerals such as rare earth elements, lithium, cobalt, and graphite places it in a uniquely powerful position to influence global supply dynamics.

European policymakers share these concerns. The European Union is actively seeking coordinated responses with the United States and other G7 nations to manage the fallout from China’s export restrictions. European Trade Commissioner Maros Sefcovic and Danish Foreign Minister Lars Rasmussen have underscored the urgency for a united front, favouring strategic collaboration and diversification of supply chains over retaliatory tariffs. They are exploring joint efforts to promote new extraction and processing projects aiming to reduce the bloc’s dependence on Chinese materials.

The European automotive sector faces particular risks due to these curbs. The Italian auto parts lobby, ANFIA, has warned that ongoing Chinese export controls threaten the supply of rare earth metals essential to electric motors, semiconductors, and defence technologies. Previous supply restrictions were mitigated by stockpiles now largely depleted, heightening vulnerability as the market for rare earths, though small globally—worth under $5 billion—is disproportionately influential over the auto industry’s functioning.

Reports of increased scrutiny on export licences for rare earth magnets since September highlight China’s tightening grip. This has caused significant delays and uncertainty for foreign buyers, even as magnet exports fluctuated earlier in the year. The EU Chamber of Commerce in China has documented continued challenges for member companies seeking timely approvals.

While China’s strategy to constrain exports of refined metals intensifies, experts argue this approach may backfire in the long term. Complete export bans could accelerate Western investments to build domestic refining capacities, which risk diminishing China’s global metal dominance as demand shifts and overcapacity grows.

U.S. Trade Representative Jamieson Greer has indicated that the imposition of the planned 100% tariffs depends heavily on whether China retracts its expanded export controls. He pointed out inconsistencies in Beijing’s justifications for restrictions—whether retaliation or national security—and emphasised the disproportionate influence China wields over high-tech global supply chains.

Despite the mounting trade war volatility, ongoing dialogue between Beijing and Washington suggests efforts to navigate this complex relationship continue. However, with Trump cancelling a key summit meeting and escalating tariffs, the trajectory leans towards strategic decoupling. The conflict is moving beyond temporary tariff skirmishes to a longer-term industrial separation where supply security now increasingly outweighs traditional concerns over cost efficiency.

This evolving standoff underscores a crucial juncture for companies and nations alike: redefining sourcing models for critical materials becomes paramount amid an unpredictable geopolitical landscape. The reshaping of global supply chains, including new mining and refining projects in Australia, Canada, and the United States, is accelerating to buffer against future disruptions.

The International Monetary Fund has warned that a deepening trade conflict between the world’s two largest economies could dampen global economic growth and stoke inflation, illustrating the broader stakes beyond the bilateral dispute.

As this complex saga unfolds, it is clear that the rare earths and battery materials at the centre of this dispute are not merely commodities but strategic assets shaping the future of technology, defence, and energy globally. Both Washington and Beijing face difficult choices balancing economic interests, geopolitical strategies, and the pursuit of technological leadership in a rapidly transforming global order.

Source: Noah Wire Services