Donald Trump tried to use America’s economic weight to force China to bend, only to discover that Beijing has built an economic weapon of its own that Washington cannot tackle.
China Finds America’s Chokepoint
The significance of the Trump-Xi summit in Washington on September 24-25 was therefore not simply the limited trade concessions the two leaders produced. The United States and China agreed on recommendations for more favourable tariff treatment covering US$30 billion of non-sensitive goods in each direction and operationalized bilateral boards dealing with trade and investment. Yet on one of the most strategically important issues dividing the two countries, there was no comparable breakthrough. The White House acknowledged that the two governments “continue to work” on American concerns over shortages of rare earths and other critical minerals, with the aim of restoring shipments to appropriate levels. That carefully worded statement reveals an uncomfortable reality for Washington: China has demonstrated that economic coercion is no longer an American monopoly.
The source of Beijing’s leverage is not simply that China possesses rare-earth deposits. According to the International Energy Agency, China accounted for around 60 percent of global mined production of magnet rare earths in 2024. Far more consequentially, it controlled 91 percent of global refining and 94 percent of sintered permanent-magnet production. That distinction matters. Rare-earth supply chains do not run directly from a mine into a fighter jet, electric vehicle or data centre. Extracted minerals must undergo technically demanding processes of separation, refining, alloying and magnet manufacturing. China dominates precisely these intermediate stages. Finding deposits elsewhere therefore cannot quickly reproduce the industrial ecosystem Beijing has spent decades constructing.
China discovered the strategic value of that ecosystem when Trump revived the trade war. In April 2025, after Washington imposed new tariffs and semiconductor restrictions, Beijing introduced export controls covering several heavy rare earths and magnets. The consequences appeared rapidly. Manufacturers in the United States, Europe and Japan faced supply disruptions. China tightened restrictions again in October before Trump met Xi in South Korea. The two leaders subsequently reached a truce under which Beijing suspended some additional controls for a year. That did not mean Beijing conceding anything permanently.
But the vulnerability never disappeared. Reuters reported ahead of the latest summit that China’s critical-mineral leverage was influencing Washington’s calculations, with Trump adopting a less confrontational posture than before previous meetings with Xi. The sequence is striking. Washington imposed economic pressure; Beijing targeted a supply-chain dependency; American and allied manufacturers felt the consequences; and access to critical minerals became an issue Washington had to negotiate with China. The trade war had become reciprocal.
From Financial Power to Industrial Power
This is bigger than rare earths because it points towards a transformation in how great powers exercise economic power. For decades, the United States enjoyed extraordinary structural advantages. The centrality of the dollar, American financial institutions and US-controlled technologies gave Washington the ability to impose sanctions, deny access to markets and restrict critical technologies. Semiconductor controls against China demonstrate that this power remains formidable.
Beijing cannot reproduce that system. Instead, it has developed leverage of a different kind. China’s power increasingly comes from occupying indispensable positions inside industrial supply chains. Rare-earth processing is the clearest example because small quantities of these materials can be essential to enormously valuable downstream industries. Permanent magnets are used in automobiles, robotics, wind turbines, aerospace systems, defence equipment and data centres. The IEA estimates that full implementation of China’s 2025 rare-earth export restrictions could put US$6.5 trillion of annual downstream production in China’s control.
This produces extraordinary asymmetry. Beijing does not need to stop billions of dollars of exports from inflicting billions of dollars of disruption. It only needs to restrict relatively small quantities of inputs for which manufacturers lack immediate substitutes. The logic resembles control over a maritime chokepoint. The strategic importance of the Strait of Hormuz does not derive from its physical size but from how much economically vital activity must pass through it. China has created something similar inside global manufacturing: industrial chokepoints.
Washington understands the danger. The United States has poured billions into rebuilding domestic mining, refining and magnet production and has pursued critical-mineral partnerships with countries including Australia, Japan and Malaysia. A recent CSIS assessment argues that the American response represents an unprecedented effort to develop alternative supply chains. But mines can be opened more quickly than entire industrial ecosystems can be reconstructed. Processing facilities require technology, expertise, investment, customers and scale. Creating genuinely independent mine-to-magnet supply chains will take years. That gives Beijing something particularly valuable in a geopolitical confrontation: leverage today against solutions that may, or may not, arrive tomorrow.
The Next Trade War Will Be About Chokepoints
The net result will not necessarily be the “decoupling” that the US once imagined. The Trump-Xi summit itself demonstrates why. The two economies remain deeply connected, and both governments are simultaneously negotiating new mechanisms for trade and investment while fighting over the strategic parts of their economic relationship. What is emerging instead is a contest over which forms of interdependence can safely survive.
Advanced semiconductors reveal one side of this struggle. Rare earths reveal the other. Washington can exploit Chinese dependence on technologies concentrated in American and allied supply chains; Beijing can exploit Western dependence on materials and manufacturing processes concentrated in China. Each is mapping the other’s vulnerabilities and attempting to reduce its own.
This will push economic security policy well beyond tariffs. Governments will increasingly ask not simply how much they trade with another country, but whether a rival controls a single irreplaceable component somewhere deep inside a production chain. That is why the unresolved rare-earth question may ultimately matter more than the headline trade agreements produced by the Washington summit.
Trump’s tariffs were designed around a world in which access to the American market was itself an overwhelming source of political leverage. China’s response has exposed how much the global economy has changed. The United States still possesses enormous economic power, but it operates inside production networks in which other states can control critical nodes.
The next stage of US-China competition will therefore be fought not simply over who sells more goods to whom, but over who controls the bottlenecks without which modern economies cannot function. China has already shown what one of those bottlenecks can do.
Salman Rafi Sheikh, research analyst of international relations and Pakistan’s foreign and domestic affairs
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