China’s Negative Impact on the World Economy: Rare Earth Curbs Create a New Flashpoint

High ranking U.S. officials have loudly declared that “China’s Negative Impact on the World Economy” in a glaring escalation of trade tensions. What’s the catalyst? Beijing’s extensive new export restrictions on rare earth and critical minerals are criticised for being more motivated by economic pressure than by justifiable security concerns. The world observes a high-stakes competition for global growth, supply chains, and geopolitical leverage as the rhetoric heats up.

The Spark: Export Limitations on Rare Earths from China’s Negative Impact on the World Economy

The 17 metallic elements known as rare earths are utilised in everything from semiconductors to electric cars, wind turbines, and defence systems. It is commonly known that China dominates the global upstream supply chain for rare earth mining, refining, and processing.

Expanded export controls were announced by China’s Commerce Ministry in early October 2025. Foreign companies now need Chinese government approval before they can export goods that contain even trace amounts of rare earths or related technologies sourced from China, particularly those related to semiconductors and magnets. The action launches licenses for products connected to memory chips with 256 layers or more and logic chips at 14 nm or less.

Beijing claims that these actions are necessary to protect national security by preventing the unapproved transfer of sensitive technology. However, some argue that a more aggressive economic logic is at work, using China’s dominance in the supply chain as a weapon to punish or put pressure on countries, businesses, and industries that depend on access to Chinese rare earths.

“China’s Negative Impact on the World Economy”: American Reaction and the Trump Administration’s Story

The scathing remarks made by U.S. Treasury Secretary appointee Scott Bessent, who charged China with purposefully attempting to destabilise the world economy, served as the focal point of the backlash. Bessent stated that China’s export restrictions are a result of internal economic strain and a wish to “drag the rest of the world along with it,” according to Business Standard. He used a metaphor of the “Leninist business model” to warn that “they will be hurt the most if they aim to slow down the global economy.“

In a broader statement, U.S. Trade Representative Jamieson Greer called the action a “global supply-chain power grab.” Both officials stressed that Beijing has the option to change its mind and defuse the situation because China has not yet put all of the draft regulations into effect.

Bessent has presented the conflict as “China versus the world” in public settings, using existential language. He has cautioned that the world will have to break away from China’s hegemony if it remains a “unreliable partner.” The United States has already threatened in public that it will take retaliatory action, including imposing 100% tariffs on Chinese imports starting on November 1.

What Credibility Does “China’s Negative Impact on the World Economy” Have?

1. Global supply chains being disrupted

• China runs the risk of stifling global production lines by enforcing export restrictions midstream (on technology, processed goods, or products that contain trace elements). Rare earth components are used by manufacturers in the US, Europe, Japan, and other countries to create everything from smartphone magnets to electric cars.
• Supply disruptions have the potential to increase strategic uncertainty, delay production, and raise input prices. According to some analysts, the action is a “bazooka” directed at the free world’s industrial base.
• According to a recent paper on trade risk, economies that depend on rare earths are particularly vulnerable structurally. Dependency clusters are most severe at intermediate (“input”) tiers, where control by a single dominant supplier, such as China, can have an uneven effect.

2. China’s own blowback risk

• The U.S. officials don’t shy from pointing out that the move may hurt China more — especially if alternate supply sources emerge. Bessent has claimed that if it seeks to damage the world economy, “China will be hurt the most.”
• Restrictive policies can, in fact, backfire because other countries may increase their investments in processing capacity, recycling, alternative technologies, and rare earth mining outside of China. According to a Newsweek analysis, by promoting supply diversification, China may eventually weaken its own leverage.

3. Can China defend the controls in terms of legitimacy and proportionality?

• Instead of portraying the restrictions as economic pressure, China frames them as national security measures. China’s response to U.S. accusations is that Washington is treating the policy as a geopolitical attack and is trying to spread panic.
• China has a variety of motivations, which adds some complexity. China may contend that, in an age of geocompetition and dual-use technologies, it must protect important technologies from being transferred overseas or reverse-engineered.

4. Repercussions for global growth

• Global growth has been precarious even before the curbs. Monetary tightening, supply chain bottlenecks, and inflation have all been significant factors. Given this, a shock to essential industrial inputs exacerbates the following side effects: supply shortages, capital reallocation, cost inflation, and investment delays.
• Concern has been voiced by governments and international organisations. During G7 talks, Japan’s finance minister raised concerns about the systemic risk posed by China’s restrictions. Fears of a new trade escalation have also cast a shadow over the IMF and World Bank meetings.

Strategic Reactions: The Plans of the United States and Allies to Counter China’s Negative Impact on the World Economy

Retaliation through tariffs:

• As previously mentioned, Trump has threatened to impose 100% tariffs on Chinese goods starting in November.

U.S. export regulations and licensing:

• The United States may impose restrictions on technology or software exports to China.

Strategic investments and stakes:

• The United States is thinking about bolstering domestic supply chains and making direct investments in rare earth businesses.

Multilateral pushback and allied coordination:

• As an act of economic pressure, the U.S. is mobilising allies to oppose China’s strategy.

Price floors and stockpiling:

• Stockpiles and minimum pricing are two examples of policies that could reduce volatility.

Different Views and Rebuttals China’s Negative Impact on the World Economy

Mutual escalation and timing:

• Some argue that Beijing’s action is partially reactive, in response to export restrictions, tariffs, and port fees imposed by the United States.

Exaggerated anxieties and market adaptation:

• Businesses and economies may adapt by redesigning products, investing in recycling, or locating substitute materials. Although painful, the disruption might not be disastrous.

China has valid security concerns.

• China, like other countries, may rightfully limit the transfer of sensitive capabilities in an era of growing technological competition.

Domestic limitations:

• According to some, Beijing is trying to survive by focussing inward as a result of China’s internal economic slowdown.