The trade dispute between the United States and China has resumed. US President Donald Trump lashed out over the weekend at Beijing’s planned tightening of restrictions over crucial rare-earth minerals.
In response, Trump has threatened 100% tariffs on Chinese imports. But with the higher tariff rate not due to start until November 1, and the Chinese controls on December 1, there is still time for negotiation.
This is no longer a trade dispute; it has escalated into a race for control over supply chains, and the rules that govern global trade. For Australia, this provides an opening to build capacity at home in minerals refining and rare-earths processing. But it also needs to keep access to our biggest market – China.
A long-running battle
Since 2018, the US has sought to choke off China’s access to semiconductors and chipmaking tools by restricting exports.
China last week tightened its export controls on rare earth minerals that are essential for the technology, automotive and defense industries. Foreign companies now need permission to export products that derive as little as 0.1% of their value from China-sourced rare earths.
Rare earths are essential to many modern technologies. They enable high-performance magnets for EVs and wind turbines, lasers in advanced weapons and the polishing of semiconductor wafers. An F-35 fighter jet contains about 417 kilograms of rare earths.
By targeting inputs rather than finished goods, China extends its reach across production lines in any foreign factories that use Chinese rare earths in chips (including AI), automotive, defence and consumer electronics.
The US plan is simple: control the key tools and software for making top-end semiconductor chips so China can’t move as fast on cutting-edge technology.
Under that pressure, China is filling the gaps. It’s far more self-sufficient in chips than ten years ago. It now makes more of its own tools and software, and produces “good-enough” chips for cars, factories and gadgets to withstand US sanctions.
Rare earths aren’t literally “rare”; their value lies in complex, costly and polluting separation and purification processes. China has cornered the industry, helped by industry policies and subsidies. China accounts for 60–70% of all mining and more than 90% of rare earths refining.
Its dominance reflects decades-long investment, scale and an early willingness to bear heavy environmental costs. Building a China-free supply chain will take years, even if Western countries can coordinate smoothly.
A window for Australia?
Australia is seen as a potential beneficiary. As Prime Minister Anthony Albanese prepares to meet Trump on October 20 in Washington, many argue the rare earths clash offers a diplomatic opening.
Trade Minister Don Farrell says Australia is a reliable supplier that can “provide alternatives to the rest of the world.” Australia’s ambassador to the US, Kevin Rudd, has made the same case.
The logic seems compelling: leverage Australia’s mineral wealth for strategic gain with its closest security partner. But that narrative is simplistic. It risks drifting from industrial and economic reality.
The first hard truth is that Australia has the resources, but doesn’t control the market. It is a top-five producer of 14 minerals, including lithium, cobalt and rare earths, yet it doesn’t dominate any of them. Australia’s strength is in mining and extraction, rather than processing.
Here lies the strategic paradox: Australia ships the majority of its minerals to China for processing that turns ore into high-purity metals and chemicals. Building alternative, China-free supply chains to reduce US reliance on China would decouple Australia from its main customer for raw materials.
Demand from the defence sector is not enough. The US Department of Defense accounts for less than 5% of global demand for most critical minerals.
The real driver is the heavy demand from clean energy and advanced technology, including EVs, batteries and solar.
China commands those markets, creating a closed-loop ecosystem that pulls in Australia’s materials and exports finished goods. Recreating that integrated system in five to ten years, after Beijing spent decades building it, is wishful thinking.
No simple winner
The US restrictions on chips and the Chinese controls over rare earths are twin levers in the contest between two great powers. Each wants to lead in technology – and to set the rules over global supply chains.
We’ve entered a period where control of a few key inputs, tools and routes gives countries leverage. Each side is probing those “chokepoints” in the other’s supply chains for technology and materials – and using them as weapons.
In the latest stand-off, Trump has floated export controls on Boeing parts to China. Chinese airlines are major Boeing customers, so any parts disruption would hit China’s aviation sector hard.
There will be no simple winner. Countries and firms are being pulled into two parallel systems: one centred on US chip expertise, the other on China’s materials power. This is not a clean break. It will be messier, costlier and less efficient, where political risk often outweighs commercial logic.
The question for Australia is not how fast it can build, but how well it balances security aims with market realities.
Marina Yue Zhang is an associate professor of technology and innovation, University of Technology Sydney
This article is republished from The Conversation under a Creative Commons license. Read the original article.
In 2024, China exported less than half a billion USD rare earth (490 million). This is peanuts to many corporation. There will be no private company willing to invest in such a merger industry, in particular, to compete with China which will still supply rare earth and products to civilian industries, such as cars. Chinese sanction is only against military use (plus companies against China). The western media tries to confuse this.
Sanctions on Boeing parts for China will hurt Chinese airlines, but will eventually drive them to COMAC and Airbus. They will also stimulate the growth of Chinese suppliers of aerospace components. It will take time, but China will eventually build up it’s own aerospace industrial base, just like they did with Tiangong, Beidou, stealth fighters, Huawei, SMIC…
I don’t want to fly on a squint airline
The tragedy of empire is that when they are on top they overextend beyond their capacity to sustain long term and step on a lot of toes on the way up. When you ride the tiger, you can never get off.
Uncle Sam’s cards are limited. Embargo of Boeing parts supply is a desperado move. Who is gonna buy Boeing planes in future and this forces CN to double down on C919/C929 rollout.
They want to fight every country. They want to rule the world. The world will be multi polar.
It may be to China’s advantage to have 130% tariffs on any products it ships to the US. This will bleed American manufacturers of many of the products and components it needs to produce the goods they make. This will hurt America a lot, while China just moves to supplying other markets.
The US is not evaluating is options very carefully. It is making pretty foolish decisions, in fact.
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Do chips need rare earths to make or do rare earths need chips to mine? It is both. But one direction is clearly more skewed than the other. And that tells you who has the big cards.