How China can ban any country from participating in the modern economy

Beijing’s new rare earth export controls go far beyond restricting access to a critical technological input, according to a former White House adviser.

On Thursday, 9/10, China’s Ministry of Commerce reported that, from December 1st, a license will be required for foreign companies to export products with more than 0.1% of rare earths originating in China or that are manufactured with Chinese production technology.

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This led President Donald Trump to announce on Friday that he would impose an additional 100% tariff on China and limit US software exports. But while it appeared to be just the latest “tit for tat” in the US-China trade war, there is much more at stake.

“We must not miss the fundamental point about rare earths: China has crafted a policy that gives it the power to prohibit any country on Earth from participating in the modern economy,” Dean Ball, who served as a senior adviser in the White House Office of Science and Technology Policy, wrote in X on Saturday.

“They can do this because they diligently built an industrial capacity that no one else had the courage to build. They were willing to tolerate costs—financial, environmental, and otherwise—to do so. Now the rest of the world must do the same.”

China holds sway over rare earths, producing more than 90% of the world’s processed rare earths and rare earth magnets. They are used across industries, from the technology sector to car manufacturers and defense contractors.

They are so critical that U.S. carmakers have reduced production due to a shortage of rare earths, as China has used the supply as leverage to counter Trump’s tariffs.

While ongoing negotiations between Washington and Beijing have eased access somewhat, trade tensions were simmering before the latest flare-up on Friday.

For example, the US has moved to restrict exports of semiconductor-related products to China by other countries. And last week, the US announced port taxes on Chinese ships, prompting Beijing to impose a similar fee on American ships docking at Chinese ports. China has also launched an antitrust investigation against US chipmaker Qualcomm.

“In other words, the United States can cut off China’s access to today’s chips, but China can make it much harder to build tomorrow’s chips and other advanced technologies,” said Michael Froman, president of the Council on Foreign Relations and former U.S. Trade Representative, in a Substack post on Friday.

Economist Robin Brooks, a senior fellow at the Brookings Institution, noted that markets expect Trump’s new tariff threat against China to backfire on the US.

But he rejected the idea that China has the upper hand over the US, saying in a post on Sunday that its exporters are suffering sharp drops in profits due to Trump’s tariffs.

“This means that China may be using rare earths to escalate the standoff with the US because it has no other choice,” Brooks explained. “The impact on its export sector is simply too considerable, making it necessary to up the ante in an effort to overturn U.S. tariffs.”

For its part, Beijing has remained defiant, with the commerce ministry saying on Sunday that China does not want a tariff war but is not afraid of one either. He also stated that export controls are not a ban on rare earth shipments, but rather a sovereign right.

Former White House adviser Ball, who is now a senior fellow at the Foundation for American Innovation, said China’s strict rare earth controls represent an opportunity for the rest of the world to build a new supply chain that can resist instrumentalization by any country.

“Always remember that supply is elastic,” he added. “If our lives depend on it, we can overcome many challenges much faster than policymakers in Beijing, Brussels and Washington realize.”