It doesn’t take an expert in international security to see that China is currently emboldened on the world stage. And to be fair, it has good reason to be confident—especially after United States President Donald Trump and Chinese leader Xi Jinping met in South Korea last week and reached a breakthrough trade deal.
Compared to the bruising 2018 trade war during Trump’s first term, Beijing is far better prepared to handle Washington this time. Over the past decade, China has fortified its economy, diversified its export base, and identified new levers of strategic influence. And instead of sparring over tariffs and counter-tariffs, China has chosen a much more potent tool of economic coercion—its dominance over rare earths, the critical minerals essential for semiconductors, defense systems, and clean energy technologies.
In the lead-up to the Trump–Xi meeting, Beijing instituted sweeping export controls on rare earth elements, signaling its readiness to weaponize one of the world’s most critical supply chains. This was, as one scholar described, “the nuclear option”—a bold move that effectively forced Washington to the negotiating table. The gambit worked.
Under the deal announced in Seoul, China gained concessions on tariffs and export restrictions, securing breathing space for its manufacturing sector and reinforcing the perception that it could outmaneuver the U.S. under pressure. For Xi’s government, it was not just about economics—it was about proving that Beijing could use its structural advantages to compel Washington into pragmatic compromises.
Chinese officials believe they understand Trump’s strategic temperament: transactional, instinct-driven, and inclined toward short-term deals over long-term principles. They view him not as an ideologically committed China hawk, but as a negotiator who can be swayed by the prospect of immediate political or economic wins.
This perception is central to Beijing’s playbook. But it also introduces risk—because overconfidence in this approach could lead to misjudgments with severe consequences for both sides and for the stability of the Indo-Pacific region.
To be sure, Beijing’s use of its rare earth leverage did not grant it a free pass. The trade deal was a product of compromise, not capitulation.
China walked away with tariff relief, suspension of port fees on Chinese-owned vessels, and a pause on a U.S. Bureau of Industry and Security rule that could have barred tens of thousands of Chinese companies from buying sensitive American technology.
In exchange, the U.S. secured commitments from Beijing to purchase American soybeans and to grant a one-year reprieve on rare earth export controls—effectively buying time for U.S. industries to seek alternative suppliers.
Significantly, the deal also excluded two issues that could have triggered fierce backlash in Washington: Taiwan and advanced chip exports. U.S. national security officials, wary of giving ground on semiconductors, succeeded in keeping Nvidia’s high-end Blackwell chips off the negotiating table. Meanwhile, Taiwan’s supporters welcomed the omission of any language suggesting a dilution of U.S. support for the island.
Beyond immediate trade gains, what China arguably won most was strategic vindication. The episode reaffirmed Beijing’s belief that its coercive economic tools can deliver results against the U.S.—especially when combined with patience and calibrated escalation.
In Beijing’s eyes, this proves that Trump can be pressured into making concessions when China threatens to restrict supplies of materials Washington cannot easily replace. The logic is seductive: if it worked with rare earths, it might also work with pharmaceutical precursors, lithium-ion batteries, or mature-node chips—areas where China still dominates global production.
With two more Xi–Trump meetings reportedly planned for 2026, Chinese strategists see opportunities to deepen or extend the current truce. Yet, the same dynamic that produces short-term peace also lays the groundwork for future escalation. The rare earth card may deliver tactical victories—but it erodes trust, accelerates supply chain diversification, and makes the next crisis harder to contain.
There is an irony to all this: Beijing’s maximum pressure diplomacy mirrors the very strategy Trump popularized. In threatening to choke off supplies of strategic goods, China has adopted the coercive tactics Washington once used against its own rivals.
But the parallels cut both ways. The Trump administration’s use of tariffs and sanctions against allies and adversaries alike pushed many countries to diversify away from U.S. dependence. Similarly, China’s weaponization of its rare earth monopoly is now motivating others to do the same.
The U.S. and its allies have wasted no time responding. Washington recently signed an $8.5 billion deal with Australia to expand rare earth mining and processing capacity. Additional agreements with Japan, Malaysia, and Thailand aim to build an Indo-Pacific network of critical mineral partnerships that can serve as a counterweight to China’s dominance.
In Europe, the standoff over Nexperia, a Chinese-owned chipmaker based in the Netherlands, revealed how seriously governments now view Beijing’s potential to weaponize supply chains. In September, the Dutch government took control of Nexperia under national security laws—prompting China to retaliate by halting exports from its factories inside the mainland.
Analysts agree that a full-scale rewiring of the global rare earth supply chain will take time—perhaps five to seven years before new investments yield operational projects. But the momentum is unmistakable. The more China uses its leverage, the faster other countries will invest in alternatives. As one European diplomat put it, “Beijing’s pressure campaign is building the very coalition that will neutralize it.”
That paradox captures the essence of China’s dilemma. The more it flexes its dominance, the more it undermines the long-term value of its coercive tools. Once rare earth supply chains diversify, Beijing’s leverage will diminish sharply. That gives Chinese leaders a short window to use this influence while it still matters—a dynamic that could make them more, not less, likely to deploy it.
But there’s a second, equally serious problem: proportionality. When every U.S. action—big or small—invites a Chinese countermeasure, both sides lose the incentive to keep disputes contained.
Imagine, for example, that Washington goes ahead with a new round of secondary sanctions on China for its oil trade with Russia, part of efforts to tighten pressure on Moscow over Ukraine. If Beijing retaliates immediately by curbing rare earth exports, Washington would have every reason to escalate further—perhaps by tightening technology bans or cutting financial access.
The logic of tit-for-tat retaliation leaves little room for compromise. And if the U.S. begins to call China’s bluff, assuming that Beijing will eventually need to resume exports, the rare earth card may lose its credibility entirely.
In this emerging environment, both powers are adopting versions of maximum pressure diplomacy—and that is a dangerous mix. The more both sides rely on economic coercion, the smaller the space for diplomatic de-escalation becomes. Every crisis, whether over Taiwan, Ukraine, or technology controls, risks spiraling into a confrontation that neither side intended.
Moreover, the strategy accelerates what many economists already describe as an irreversible decoupling. Both Washington and Beijing are now convinced that reliance on the other constitutes a national security vulnerability. For global supply chains, that means higher costs, lower efficiency, and a fragmented technological ecosystem divided along geopolitical lines.
For now, Beijing can claim victory. The Seoul deal gives it tangible economic relief and political validation at home. It strengthens Xi’s narrative that China can stand firm against U.S. pressure and even extract concessions from Washington when it plays its cards right.
But the longer-term costs are mounting. Every time China brandishes the rare earth weapon, it signals to the rest of the world that it cannot be trusted as a stable supplier. That message is already reshaping global policy and investment decisions in ways that will, over time, erode China’s dominance.
The rare earth gambit may have worked this time—but it is not a sustainable strategy. Overuse will only accelerate the creation of parallel supply chains that bypass China entirely.
The next two Trump–Xi meetings will determine whether this fragile détente can evolve into a durable framework—or collapse into renewed confrontation. If both sides double down on pressure tactics, they may find themselves trapped in a cycle of escalation with diminishing returns.
China’s maximum pressure approach delivered tactical success at the Seoul summit, but it has also sown the seeds of future vulnerability. The United States, meanwhile, has learned a crucial lesson: dependence is weakness, and supply chain resilience is national security.
The rare earth card may be powerful—but it is not inexhaustible. Beijing’s confidence today could easily become tomorrow’s overreach. And in the unforgiving calculus of great-power politics, the line between leverage and liability is perilously thin.
