China’s Export Control Strategy

China maintains a chokepoint in the global supply chain by not approving exports of certain rare earth metals used in U.S. weapons. While Beijing opened a limited “green channel” for civilian-use exports to trusted U.S. firms, military materials remain blocked.

The U.S. has refused to lift AI chip curbs in exchange for rare earth access. There is the possibility of extending tariffs on Chinese goods, adding uncertainty to a comprehensive agreement.

China’s monopoly, especially in refining and processing rare earths, presents a strategic challenge for the West. Analysts note that issues such as trade imbalance and critical minerals may persist unresolved, possibly throughout Trump’s term. The discussions indicate Beijing’s readiness to use rare earths as a geopolitical tool.

Trade Negotiation Dynamics

Talks between the U.S. and Chinese delegations took place in London, yet they deliberately left out any discussion about the rare earths used in military applications. The Chinese, represented by negotiators, suggested outright that any approval to export these materials would depend on whether Washington softened its stance on AI chips—an area where the export rules became tighter recently.

Meanwhile, China continues to hold back permission for exporting these metals, unless they’re intended for certain civil uses and even then, only to companies they deem reliable. Materials for military use remain off-limits. This tactic isn’t new—China’s control over the world’s refining capacity makes it quite hard for others to quickly fill the gap.

Washington’s unwillingness to compromise on its chip restrictions means there’s little chance of a formal deal in the near term. On top of this, American officials are thinking about extending tariffs on goods from China, which adds to market tension and could push talks further out of reach.

Huang indicated that the current arrangement shows how resource policy is being used actively in strategy. There’s clear intent on Beijing’s part to leverage their processing strength to affect diplomatic pressure elsewhere.

For those of us in trading circles, this suggests one clear path—duration-based plays around these conditions are likely to move with policy pulses, not just conventional supply metrics. The refining bottleneck tells us upstream limits are not easily eased, at least not in the next two fiscal periods.

Derivative positions tied to industrial metals or aerospace components may reflect irregular patterns, swinging with each policy shift or export change, not with baseline demand. This environment supports trades sensitive to geopolitical triggers, especially over multiple time horizons, rather than short-term technicals.

Barring a reversal on chip regulations, we see little that would unlock samarium exports in sufficient quantities to influence broader defence supply chains. Insight from Zheng reinforces this—decisions are tied to wider power balances rather than sector-specific pressures.

In this case, adjustments are better placed in volatility-aware instruments, rather than outright long positions. Any exposures tied to downstream manufacturers might face margin pressures or unstable order flows, even in otherwise strong markets.

Those with leverage exposure in metals futures or options will have to allow for sudden reversals. Watch for signals on export licences or shifts in tariff enforcement timetables, especially around fiscal policy dates. Timing may matter more than levels.

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