China Tightens Rare Earth Grip on US Firms in Escalating Trade War

China has imposed sweeping new export controls on 10 United States companies — including rare earth miners MP Materials and USA Rare Earth — and barred government procurement from 46 US defense contractors, escalating trade tensions between the world’s two largest economies just weeks after a high-profile summit between Presidents Donald Trump and Xi Jinping. The actions, announced on June 22 by China’s Ministry of Commerce, mark a significant escalation in the technology and critical minerals rivalry that has come to define US-China relations.

Background: A Fragile Truce Unravels

The latest measures follow a pattern of retaliatory escalation that has persisted despite diplomatic efforts. In May 2026, Trump visited Beijing for talks with Xi, where both sides agreed to a trade truce and pledged to “enhance economic cooperation.” However, the goodwill proved short-lived. On June 8, the Pentagon expanded its Section 1260H list of Chinese military-linked companies, adding approximately 80 entities — including household names like Alibaba, Baidu, BYD, NIO, and CATL — bringing the total to 188 companies. The designation identifies firms the Pentagon believes are owned or controlled by the Chinese military or are “military-civil fusion contributors.”

According to CNBC, Baidu rejected the accusation as “totally baseless,” while Alibaba stated it would “take all available legal action against attempts to misrepresent our company.”

China’s Retaliatory Measures

China’s Ministry of Commerce responded on June 22 by adding 10 US entities to its export control list. Chinese companies are now prohibited from exporting “dual-use” items — goods with both civilian and military applications — to these firms. The restrictions apply globally, with the ministry stating that “foreign institutions and individuals worldwide are also prohibited from transferring or providing Chinese dual-use goods to them.” Ongoing export transactions must be suspended immediately.

The targeted companies span aerospace, drones, robotics, and defense sectors: AVEOX, Red Cat Holdings, Teal Drones, IMSAR, Jaia Robotics, Ball Aerospace & Technologies, Oshkosh Defense, L3Harris Maritime Services, MP Materials, and USA Rare Earth.

As Al Jazeera reported, China’s Commerce Ministry said the export ban was issued to “safeguard national security and interests and fulfil international obligations such as non-proliferation.” Separately, China’s Ministry of Finance barred government procurement from 46 US companies, including subsidiaries of Lockheed Martin, Boeing, General Atomics, and General Dynamics, though US-funded locally registered companies received an exemption.

Rare Earths: China’s Strategic Leverage

The inclusion of MP Materials and USA Rare Earth is particularly significant. Rare earth elements (REEs) are a group of 17 metals essential for high-performance permanent magnets used in electric vehicles, wind turbines, drones, missiles, fighter jets, and smartphones. China controls approximately 60-70% of global rare earth mining and over 90% of processing and permanent magnet production — giving Beijing enormous leverage over critical supply chains.

MP Materials operates the Mountain Pass facility in California, the only operating rare earth mine in the United States. USA Rare Earth is developing a mine-to-magnet supply chain in Texas and has restored dormant magnet-manufacturing equipment in Stillwater, Oklahoma. Both companies have received significant US Department of Defense investments aimed at reducing dependence on Chinese supply chains.

As Euronews detailed, the 10 companies subject to China’s new export controls include defense contractors specializing in aerospace, drones, synthetic-aperture radar, and shipbuilding.

Expert Analysis: Tit-for-Tat Escalation

Analysts describe China’s actions as a calibrated response to Washington’s expanding blacklist. “We can interpret this as a tit-for-tat response, and that fits into China’s playbook any time we’ve seen escalation from the US side in terms of trade and investment tools,” Nick Marro, global trade lead analyst at the Economist Intelligence Unit, told Al Jazeera.

Cameron Johnson, a senior partner at Shanghai-based consultancy Tidal Wave Solutions, noted that Beijing’s orders mirror US semiconductor export controls in their global scope. “They basically say it doesn’t matter where or who you are, you are bound by this regardless of circumstance,” Johnson said. However, he noted the restrictions may be difficult to enforce, as many targeted companies have already moved supply chains out of China or begun de-risking operations.

Singapore-based geopolitical analyst Steve Okun offered a stark assessment of the broader trajectory. “There is no ‘truce’ in the US-China trade war,” he told Al Jazeera. “Expect further actions from both sides as well on export controls and investment restrictions.”

Broader Implications and What Comes Next

The escalation carries significant implications for global supply chains. The G7, meeting just days before China’s latest action on June 19, announced a goal to cut dependence on Chinese rare earths to below 60% by 2030 — highlighting growing Western concern over supply chain vulnerabilities.

According to The Oregon Group, China’s export of rare earth permanent magnets plunged 74.3% year-over-year to 1,239 metric tons in May 2025 following Trump’s initial tariffs, and supply bottlenecks are expected to persist through 2026.

Looking ahead, China is reportedly preparing even tighter global rare earth export restrictions for November 2026. The United States continues efforts to build domestic rare earth processing capacity through DoD investments, while the G7’s 2030 target signals a long-term Western strategy to reduce dependency on Beijing.

For now, the diplomatic niceties of the Trump-Xi summit appear to have given way to a renewed and potentially deeper confrontation. As Johnson put it: “This is probably just the beginning of the back and forth.”