Key facts
- China's rare earth shipments to the US dropped 21% in August.
- The decline leaves US supplies of components used in cars, consumer goods, and weapons as a key talking point.
- China controls more than 95% of critical material refining.
- Beijing is expected to control mineral mining and global refining of critical materials through at least 2030.
Ahead of a summit between Chinese President Xi Jinping and US President Donald Trump in Washington on Thursday, China's rare earth shipments to the US saw a sharp decline in August. According to customs data released Sunday, shipments dropped 21% from July to 512 tons. This reduction highlights China's significant control over critical material refining, which has been used as leverage against the US.
UBS analysts, citing chief China economist Yu Song, suggested the meeting between Xi and Trump would focus on strategic stability and modest progress on tariffs, rare earths, and AI safety. Political risk analyst Marcus Bischoff anticipates no major breakthrough, expecting continuity in US-China relations, with cautious optimism stemming from recent discussions between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng.
Barclays' global head of economics research, Christian Keller, noted that China's near-total control of over 95% of critical material refining, including magnets, tungsten, germanium, and gallium, has been a tool against the US. This has prompted the US to accelerate efforts to secure conflict-free supplies. Bloomberg reported that the latest trade data underscores China's resource nationalism and the weaponization of critical material supply chains.
Chris Kennedy of Bloomberg Economics stated that Washington requires stability with Beijing to maintain the flow of critical inputs, but periods of calm that restore access to lower-cost Chinese materials can diminish the US's urgency to break its dependence. Barclays' Keller projects that Beijing will maintain control over mineral mining and global refining of these materials through at least 2030. Breaking this grip is seen as an emerging theme for the West, crucial for reindustrialization, AI data center buildouts, power grid upgrades, and defense initiatives.