China: If I were a betting man

Investment Analysis Clubs Macro Economic Trends and Risks
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If I were a betting man, and I am not, China won’t back off regardless this time.

The US House Select Committee on China panned the Asian nation for the move, describing the restrictions as “an economic declaration of war against the US.” Committee Chairman John Moolenaar, a Republican, said in a statement on Thursday that China has “fired a loaded gun at the American economy.”

Germany, Europe’s biggest economy, has already introduced measures to diversify its supply of raw materials, and its economic ministry called China’s curbs a “great concern” on Friday. The government said it’s in close contact with affected companies and the European Commission to respond.

Taiwan relies mainly on Europe, the US and Japan for rare earth supplies. “We still need further assessment before deciding on the impact” on the chip industry, the nation’s economic affairs ministry said in a statement. “We will continue to monitor indirect impact from fluctuations in the pricing of raw materials and supply chain adjustments.”

This AI summation is not verified. It is mostly accurate, but what is wrong in the list I do not know. The bigger points are above.
AI Overview

China is not completely cutting off rare earth materials

but has significantly expanded export controls, requiring licenses and adding restrictions on 12 out of 17 rare earth elements. This “tightening” of controls, which also includes restrictions on related technologies, is a strategic response to trade tensions with the US and may cause supply chain disruptions for companies in affected industries like defense and high-tech manufacturing.

Key actions and implications

  • Expanded restrictions: China has expanded its export controls to include 12 rare earth elements, adding five more to the seven it previously restricted in April 2025.
  • Technology controls: The restrictions now also apply to technologies used in the mining and refining of rare earths, as well as finished products like magnets containing even trace amounts of Chinese-sourced rare earths.
  • License requirement: Companies wishing to export these materials or products will need to apply for licenses from Beijing.
  • Strategic purpose: The restrictions are seen as a strategic maneuver, particularly in response to trade tensions and new tariffs from the United States.
  • Potential impact: This could lead to supply shortages and higher prices for rare earth materials and related components, impacting industries from electric vehicles to defense systems.
  • Targeted approvals: China has indicated it may reject license applications related to defense and will scrutinize those for advanced semiconductors and some artificial intelligence applications.
  • Ongoing development: While some European companies have received supplies, others are facing delays, and the licensing process itself is complex.
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China’s position was a partial cut off of RRE materials.

So it looks less partial now? More partial later? But RRE will probably see some licensing denials.

This assumes some yaps keep quiet. Good luck.

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In China what are they saying?

Recent import data

  • July 2025: The U.S. imported $26.4 billion from China.
  • Year-over-year (July 2024 to July 2025): This represented a decrease of $14.4 billion (35.3%).

Lets do some very rough maths, 26 x 12 would be $312 billion per year.

Xi wants to negotiate.

But he is going to stymie our military. The licensing fees etc to export products with RRE will now be in place. This has major effects on AI as well. We need to see how they settle the AI disagreement.

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Sure. But can he trust negotiations with a guy who is famous for not following through on his own side? No, he can’t. I mean, the guy just walked back everything from Canada because they had the audacity to tell Americans what Reagan thought of tariffs 40+ years ago.

You can’t negotiate with a child.

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The complete statement after some thought last night.

Xi wants to negotiate from an advantage.

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I am reminded of the OPEC oil embargo of the 70’s, when the Arab nations, to prove a point and demonstrate their strength, began holding back supplies of oil.

There was turmoil for several months, with gas lines forming and worries about home heating, and there was economic disruption which cascaded for a couple years, but in the end they provoked a recession, which lowered the demand for oil, and the pumping reduction suddenly became less acute simple because there was less demand - both for autos and for industry.

I am not minimizing the disruption and the problems it caused, but in the end it woke the US up and we began to find new ways and more ways to drill (baby drill), to bring new supplies online, and the economy rebounded as oil prices declined by 2/3. That was a big benefit to Reagan who rode the improving economy to a second term.

I see the holdback of refined rare earths in the same light. At last the people who keep shouting “freeee market” and “get the government out of it” now understand that sometimes the market is wrong and you have to nudge it to insure your own domestic supplies of strategically important materials.

A year ago you couldn’t get anyone (in Congress) to focus on rare earths, even though it was becoming more and more obvious that it was a vital cog in the American economy. China’s threat - and now follow through - has finally awakened the sleeping giant, we are are belatedly scurrying around procuring new supplies and offering to help other, more reliable allies to set up refining operations as well as instituting some of our own.

Frankly I rather feel the same way about steel and aluminum production, but that’s for a different thread, even though the motives and reality are the same.

Sometimes it’s better to wave around the gun rather than actually pull the trigger. Before the bullet goes off people dismiss it as just a lot of talk. Once the trigger is pulled they realize you are serious, and set about putting their house in order, as they should have in trhe first place.

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There is some limited solace in understanding “self sufficiency” in compromise from efficiently delivered value “just in time”.

Victory gardens
Trades taught in boy scouts/4H/FFA/FHA… all the "A"s.
local sourcing
local talent pools
…
..
.

Short term pains bring long term gains? (or at least sufficiency).

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Goofy,

Rre, steel, aluminum etc

There is little reason to reinvest. That is tge political dereliction