Trump’s China Deal: But First Some Hardball over Rare-Earths

President Trump exploded recently on Truth Social, accusing China of being extremely hostile, extraordinarily aggressive, and a moral disgrace for its new restrictions on rare earth exports. In his rage, Trump announced that “the United States of America would impose a Tariff of 100% on China, over and above any Tariff that they are currently paying.”

So what were exactly in China’s new curbs on the export of rare-earth minerals and technologies that angered Trump so much?

On Oct. 9, China’s Ministry of Commerce released two new regulations regarding rare-earth exports to foreign entities. One was about export-control measures on rare-earth items, the other about export controls on rare-earth-related technologies. Back in April, China had put some limits on its export of rare-earth metals and magnets. October restrictions are an expansion to include Chinese rare-earth elements, technologies, and extraterritorial control.

Specifically, the new rules require foreign companies to get a license before exporting certain rare-earth items, even products manufactured overseas, that contain at least 0.1 percent of Chinese-origin materials. Similarly, licensing is also required for rare-earth metals and oxide manufactured outside China involving Chinese technologies in rare-earth mining, smelting, and separation, metal smelting, magnetic material manufacturing, or rare-earth secondary-resource recycling. And of course, all exports involving rare-earth metals and oxide originating from China require applications first. Any applications for military purposes, or for importers and end-users on export control or watch lists, would not be approved.

As with their boss, Commerce Secretary Scott Bessent and Trade Representative Jamieson Greer were also mad at China’s latest move. Bessent said this was China vs. the world, while Greer said it was China’s power grab. The posture allowed China to be both bully and victim in this trade war.

President Trump and his trade officials may have not realized that China was simply copying what the United States did to China in terms of its restrictions on U.S. export of semiconductors.

Back in December 2024, towards the end of the Biden administration, the Department of Commerce announced a package of rules of “Export Controls to Restrict China’s Capability to Produce Advanced Semiconductors for Military Applications.” They included controls on semiconductor manufacturing equipment (SME), software tools, high-bandwidth memory, and two new proposals of Foreign Direct Product rules and provisions which extended jurisdiction over specified foreign-produced SME and related items containing any amount of U.S.-origin integrated circuits, etc., with global territorial reach.

The U.S. Foreign Direct Product Rule used to restrict semiconductors export to China was introduced back in 1959. It allows the Department of Commerce to place controls on the transfer of certain items made abroad with the benefit of U.S. technologies. Meanwhile, China did not take off as a force in international trade until after it joined the World Trade Organization in 2001. It basically scrambled to establish trade laws and regulations as it sought to comply. Trade officials in Beijing most likely did not know anything about the Foreign Direct Product Rule until the U.S. used it to hit Chinese telecommunications giant Huawei in 2020.

Well, now, as a good student from the best teacher, China obviously has gotten its own version of FDP rules as indicated in Ministry of Commerce’s recent announcements on rare earths. Reaction to this sweeping course of events was well captured in news headlines: “To hit back at the United States in their trade war, China borrows from the US playbook,” AP wrote. “China Puts Trump in a Corner. Every Way Out Hurts,” MSN said. “China’s Rare Earth Restrictions Aim to Beat U.S. at Its Own Game,” The New York Times posted.”

Imitation does not always feel like the sincerest form of flattery, especially when a trainee outdoes the master.