Trump Administration Launches Industrial Policy to Counter China Rare Earths

The United States government and China have entered a severe trade conflict centered on rare earth minerals critical for military weaponry, artificial intelligence, and renewable energy. President Donald Trump initiated the escalation by implementing tariffs on wood, furniture, and kitchen cabinets, while threatening an additional 100% tariff on all Chinese imports by November 1. This would raise total tariffs on Chinese goods to 130%. In retaliation, the Government of China restricted rare earth exports, required licenses for minerals sold to foreign militaries, and sanctioned American subsidiaries of the South Korean company Hanwha.

To ensure national security and self-sufficiency, Treasury Secretary Scott Bessent announced a shift toward industrial policy, introducing price floors and forward buying across seven strategic markets to combat Chinese market manipulation. The administration is expanding government ownership by taking equity stakes in key companies, including Intel, US Steel, Trilogy Metals, and MP Materials. These measures aim to reduce reliance on China, which controls approximately 70% of rare earth metals and 90% of refining capacity.

The conflict has triggered global economic volatility, causing the S&P 500 to drop 2.7% on October 10. International reactions vary, with the European Union imposing 50% tariffs on Chinese steel and Mexico proposing similar tariffs on Chinese electric vehicles. Meanwhile, India has moved closer to China after the U.S. imposed tariffs on Indian goods. In the private sector, Apple Inc. entered a $500 million partnership with MP Materials to produce recycled rare earth magnets domestically.