The US-China trade war is flaring up again, this time with rare earth export controls at the center of the storm. As President Trump and Chinese President Xi Jinping prepare for their highly anticipated meeting at the end of October, tensions between the world’s two largest economies are rapidly escalating, adding more uncertainty to this crucial summit.

China’s Commerce Minister Points Finger at Washington

Chinese Commerce Minister Wang Wentao made his position crystal clear during discussions with Apple CEO Tim Cook, attributing the recent deterioration in trade relations to Washington’s series of restrictive measures against China. This statement reveals Beijing’s tough stance at the negotiating table and reflects the deep-rooted contradictions in US-China economic relations.

An adviser to the Chinese Foreign Ministry sent an even more telling message: China is willing to work with the US but is fully prepared to walk away from negotiations. The adviser stated that whenever they sit down for talks, if no agreement can be reached, China can leave without hesitation. This “take it or leave it” attitude demonstrates Beijing’s confidence in trade negotiations.

Rare Earth Controls as Negotiating Leverage

China’s newly announced export controls on the rare earth supply chain have become the focal point of this renewed trade tension. Notably, some restrictions won’t take effect until December 1st, leaving approximately a month and a half for negotiations. Analysts believe this is a deliberately designed negotiating strategy rather than a straightforward economic sanction.

According to a Greater China equities expert at UBS Global Wealth Management Chief Investment Office, this move is indeed a negotiating tool. The announcement from China’s Ministry of Commerce explicitly indicates that Beijing is open to bilateral and multilateral conversations around these export controls, leaving room for dialogue.

Economic Pressures Facing China

Behind the trade war, China is confronting severe economic challenges. High youth unemployment, a struggling property sector, and soft domestic demand are creating a complex web of problems, making Beijing desperate for a more durable and predictable tariff policy. The trade war is having real economic consequences for both the US and China, and Beijing is trying to leverage every tool at its disposal to secure a more favorable negotiating position.

Global Supply Chain Restructuring Is Irreversible

However, experts warn that China may have already missed the optimal window to rebuild trust. Since June 2023, China has successively imposed export restrictions on critical minerals including gallium, germanium, tungsten, and antimony. This weaponization of mineral resources has accelerated efforts by Japan, Australia, the EU, the United States, and Canada to develop domestic rare earth and permanent magnet capabilities.

Even if US-China trade conflicts ease in the future, this breach of trust will be difficult to repair. Countries have already begun building critical supply chains independent of China. The G7 has even started discussing establishing a joint price floor to create a market outside of China. Under the Trump administration’s multilateralism framework, critical minerals have become one of the few areas where countries are willing to work together.

Can the Trump-Xi Meeting Break the Deadlock

As the Trump-Xi summit approaches, markets are closely watching whether the two leaders can find ways to defuse tensions. Beyond rare earths and magnets, issues such as tariffs and semiconductors may also be on the negotiating table. However, given the deep-seated contradictions between the two sides across trade, technology, and geopolitics, reaching a comprehensive agreement in the short term remains highly challenging.

This trade game is not just about the economic interests of China and the US but will profoundly shape the future landscape of global supply chains.