The systemic competition between China and the United States has entered a new phase, that of war not war, or cold war if you prefer. Trump's choices on tariffs and international trade have simply accelerated a process that has been going on for some time.

The two superpowers are destined to collide – in terms of size, interests, ambitions, and influence – despite the deep interdependence that continues to bind their economies. The Trump administration's decision to raise tariffs on Chinese goods to 145% led to a harsh reaction from Beijing, which responded by raising its own barriers to 125%, triggering a full-blown trade war, the outcome of which is unpredictable. In practice, the decoupling of the two economies is in full swing, but it had already been anticipated by the progressive reduction in the amount of US public debt held by China: from around 1,200 billion dollars in 2016 to 760 billion in 2024. This is a very significant reduction, which has gone hand in hand with the growing geopolitical tensions between the two countries.

The toughest response from Beijing to Washington, with a purely political-strategic flavour, was the decision to introduce restrictions on the export of rare earths and related elements (starting with magnets), by requesting that companies adopt special licences. Seven so-called medium-heavy rare earths (out of 17 metals/materials belonging to the rare earth category) are in the firing line: samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. In practice, shipments destined for international markets have been blocked in Chinese ports, while waiting for the Chinese government to issue new regulations on the export of rare earths. A very clear signal, both to the US and to other Western countries, which could be exempted from these restrictions at a certain point and be lured by the prospect of agreements with Beijing. Today, China directly controls over 70% of rare earth production and, above all, has over 90% of global processing and refining capacity.

In short, Beijing has the raw material and the industrial process, of which it is essentially the monopolist. This means that in many cases even other countries that extract rare earths from their subsoil, such as Australia for example, send them to China for processing and refining; a very complex process with a high environmental impact. Translated into political-strategic terms: Beijing is now able to manipulate the global value chain of this type of material to its advantage. Rare earths – which, despite their name, are quite common – have magnetic properties, are resistant to high temperatures, improve the resistance and mechanical properties of alloys, etc. and are widely used in the production of components for mobile phones, tablets and laptops (screens, batteries, etc.), cars (batteries, catalytic converters, etc.), wind turbines, etc. Rare earths are also fundamental for military production.

A study by the US Congressional Research Service (CRS) has quantified the rare earth elements (starting with the magnets for the F-135 engine) present in an F-35 at around 400 kg, as well as the equivalent elements on board a VIRGINIA nuclear-powered attack submarine, standing at 4 tonnes. To free itself from its dependence on China, in 2020 the Pentagon began to invest in re/creating an industry dedicated to the extraction and processing/refining of rare earths on US soil (we'll talk about this in a future article), but it will be at least a decade, perhaps even longer, before any really significant results are seen. A window of opportunity that the Chinese will not fail to exploit.

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