The economic rivalry between the United States and China is entering a perilous new chapter — a struggle not just over trade, but over control of the global supply chain. As both nations restrict the flow of critical technologies and materials, industries across the world are facing mounting uncertainty.
Tech and Mineral Controls Shake the Industrial Base
Tensions surged last week after the U.S. halted specific exports to China, including components vital to jet engines and semiconductor production. The move followed Beijing’s clampdown on exports of rare earth minerals — essential elements in a range of high-tech and defense applications.
Each side has accused the other of acting in bad faith. For companies caught in the crossfire, the consequences are immediate and severe: many products rely on components sourced from both countries. The disruption has alarmed U.S. officials, who now fear that other vulnerabilities — such as pharmaceutical ingredients or shipping chokepoints — could be exploited next.
"The supply chain wars that we’ve been speculating about for years are now happening." — Liza Tobin, Garnaut Global
The Aviation Sector: Frontline and Casualty
Nowhere is the mutual dependence more visible than in the aerospace industry. U.S. firms like GE Aerospace supply core engine and navigation technologies to China, which is eager to build competitors to Boeing. Yet producing these sophisticated systems also depends on Chinese-processed rare earth elements — used in high-temperature coatings and precision components.
When China restricted exports of these minerals in April, it shook the foundation of advanced U.S. manufacturing. In May, Ford Motor temporarily shuttered its Chicago plant after a supplier ran out of critical magnets.
U.S. Retaliates With Export Controls
The American response has been swift. Authorities revoked key export licenses allowing technology shipments to China — including aviation systems, biotech, and chip design software. Meanwhile, interagency efforts are accelerating to bolster domestic rare earth production. Officials are weighing federal investments in new mining and processing sites — though bringing them online could take decades. On average, it takes 29 years to launch a single U.S. mine, according to S&P data.
The Trump administration is also considering adding major Chinese firms — including chipmakers and tech giants Alibaba, Tencent, and Baidu — to an entity list that would severely restrict trade.
A Conflict Years in the Making
The current impasse is the culmination of years of strategic decoupling. After early rounds of tariffs under the Trump administration, many American companies diversified production into Vietnam, Mexico, and other regions. China, under Xi Jinping, doubled down on self-reliance — investing heavily in domestic capacity for semiconductors, electric vehicles, and solar panels.
Despite these efforts, economic integration remains deep. Trade between the two countries still exceeds hundreds of billions of dollars annually. Breaking these ties — even in the name of national security — will be both costly and complex.
Semiconductor Restrictions Go Global
Since 2022, Washington has expanded controls on advanced semiconductors, aiming to curb China’s access to AI and high-performance computing technologies with military applications. These measures apply extraterritorially, barring even foreign companies from supplying China if their products incorporate U.S.-origin software or components.
While some allies bristled, most complied — recognizing the reach of U.S. export law. For Beijing, however, the restrictions on minerals are a counterweight to Washington’s dominance.
Beijing Fights Back With Licensing System
In response, China introduced a licensing regime to tightly manage exports of rare earths and related products. When the U.S. raised tariffs to 145% in April, Beijing retaliated by halting many shipments outright.
A glimmer of relief came in May, when officials from both countries met in Geneva. They agreed to lower tariffs and suspend non-tariff countermeasures. Yet according to U.S. Trade Representative Jamieson Greer, China has been slow to resume mineral exports.
"We haven’t seen the flow of some of those critical minerals like they’re supposed to be doing." — Jamieson Greer, USTR
President Trump, characteristically blunt, accused China of violating the agreement in a Truth Social post, declaring: “So much for being Mr. NICE GUY!”
Beijing’s Ministry of Foreign Affairs rejected the allegations, insisting it had honored the Geneva consensus. Spokesman Lin Jian argued that it was the U.S. that breached the deal by blacklisting Huawei chips and canceling Chinese student visas.
Uncertainty Remains High for U.S. Firms
Although some U.S. automakers and electronics companies have received export licenses from China, others face prolonged delays and rejections. Beijing has appeared to favor European applicants over American ones.
Diplomatic strain is also widening. The Trump administration is pushing to revoke visas of Chinese students with links to the Communist Party — a move certain to inflame tensions further.
Whether a resolution is in sight remains unclear. A call between Trump and Xi Jinping is reportedly being arranged, though Chinese officials have yet to confirm.
A Costly Path to Independence
Daniel H. Rosen of the Rhodium Group said China foresaw the importance of rare earths and invested heavily in supply chains the U.S. neglected. Today, China mines 70% of the world’s rare earths and processes 90%. It also dominates battery production, electric vehicles, and key metals like steel and aluminum.
Reducing U.S. dependence would require not just capital but cooperation with trusted allies. “It’s going to be expensive,” Rosen said. “We have a long way to go.”
Though mineral shipments have resumed in part, uncertainty prevails. Paul Triolo of Albright Stonebridge Group noted a sharp decline in exports since April. He called the Chinese licensing system “cumbersome” and warned that this isn’t a short-term issue.
"This problem is deep and long lasting. It will not go away, or be easily solved." — Paul Triolo, Albright Stonebridge Group
