China’s Latest Rare Earth Gambit: A Cold War on Technology

The Chinese have upped the ante in their trade war with Donald Trump. In a move that is as calculated as it is consequential, Beijing has now banned the export of any and all processing equipment related to rare earths—machinery used in refining, alloying, and fabricating end-use materials. This is not another symbolic tariff; it is a direct strike at the industrial heart of Western efforts to build independent rare earth supply chains.

To grasp its magnitude, consider that for the past two decades, virtually every piece of precision machinery used to convert rare earth oxides into metals, alloys, or magnets has come from China. Western firms have depended on Chinese engineers, Chinese instruction manuals, and Chinese spare parts. Until last week, Beijing tolerated this dependency under tight control—allowing equipment exports “out of a catalog,” as I put it, without manuals or technicians. Those days are over.

This decision may look bureaucratic, but it is geopolitical. China has not merely cornered the market on rare earth elements—it now controls the means of producing end user forms of them. The restriction targets every step with dual-use potential, meaning any process or product that could serve both civilian and military industries. Magnets, alloys, and high-purity metals all fall into that category. Xi Jinping understands exactly how to weaponize dependency: he is holding the cards, and he has just raised the stakes.

The implications for Western projects are enormous. When I toured Less Common Metals in the U.K. last December, I was shown a critical component of their operation—a spin caster, the machine that transforms molten rare earth alloys into uniform slugs for magnet production. “The interior is Chinese, the exterior Japanese,” the engineers told me. “The Chinese make the best spin casters; the Japanese make the best furnaces.”

That firm has since been acquired by USA Rare Earth, Inc. (Nasdaq: USAR), which intends to reproduce the technology in Oklahoma. But here’s the problem: you can’t replicate a process without the machines—and those machines are Chinese. The new export ban means USA Rare Earth, Inc. will need to design, build, and test its own hardware. That is not impossible, but it could add years to development timelines.

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