Lawfare, Leverage, and Lex Talionis
On October 8, 2025, China has implemented major new export controls on rare earth metals and technologies, substantially tightening its grip on the global supply chains. These moves come ahead of high-level talks between Chinese President Xi Jinping and US President Donald Trump and involve new licensing requirements, expanded lists of restricted elements, and targeted measures for technology transfer, especially in defence and semiconductor sectors.
The latest rules require foreign firms to obtain special licenses to export any products containing more than 0.1% of Chinese-origin rare earths, or that involve Chinese refining and magnet-making technologies. Even at the margins, inclusion of Chinese-origin rare earth or samariam materials in exported or even re-exported products going out of other countries, can be flagged and targeted by China’s Ministry of Commerce (MOFCOM).
It is no secret that China controls 90% of the rare earth processing segment. Arguably, from Beijing’s perspective, this is vital leverage in its trade war with Washington. With US President Donald Trump announcing intention to restore 100% tariff on Chinese goods and even target Chinese software, the October restrictions from Beijing show its anguished willingness to hurt defence and semiconductor producers in the West to the greatest degree possible.
In the immediate term, it is very likely that some panic is induced and by the time the December 1 deadline for the regulations coming into effect rolls around, firms and governments have wrangled with Beijing for some concessions. Re-exporters such as India and Taiwan may similarly want to seek concessions against long approval wait times and supply chain disruptions.
ET Now’s latest segment, ‘Swadesh Vishesh’, hosted a short panel to discuss the implications. I concluded on the show:
You can watch ET Now’s complete Swadesh Vishesh show on this topic here.
China’s codification of these extended restrictions is a part of its strategy of “lawfare”, where not just exporters and investors, but also know-how and intellectual property are protected by strict legislation.
The widesweeping restrictions covering rare earths, permanent magnet materials, samariam materials, and much more, make compliance the big challenge. And so, even if in the long-term, countries can succesfully diversify or build domestic processing alternatives, in the next few years, firms are bound to face difficulties seeking permissions from China’s MOFCOM and fulfilling contracts.