European Industry Under Siege: China Deploys Rare Earths As Economic Weapon

Gulf Insider

2 days ago

As U.S. tariffs tighten the screws on China's export machine, Beijing is striking back—with strategic precision. Export restrictions on rare earths are now Beijing's latest move to break down European trade barriers and push back against escalating pressure from Washington.
In today's global trade standoff, the gloves are off. The U.S. is wielding its market clout—25% of global consumption originates from the American domestic market. Anyone in the export business must deal with the United States. China, meanwhile, holds an unchallenged monopoly on rare earths—and is making it clear it will not hesitate to weaponize that dominance. The stakes are rising, and national interests now override globalist courtesies.
No Friends—Only Alliances
Europe is learning the hard way: in geopolitics, there are no friends, only temporary alliances. China's tightened export controls on rare earth elements risk plunging Germany's industrial sector into a severe resource crisis. With nearly 85% of global rare earth refining under its control, Beijing is the chief supplier of key metals like dysprosium, terbium, and yttrium—critical for electric motors, medical tech, and defense systems.
Since April 2025, access to these raw materials has been restricted to licensed exporters only—a de facto embargo. The fallout is immediate: several German manufacturers have already been forced to scale back operations. Others face complete shutdowns. Industrial metal prices continue climbing, and the fragility of global supply chains is now exposed in brutal detail. Europe's resource dependency is becoming a major liability—and a strategic weakness in the coming trade war negotiations.
Target: New Markets
China's export curbs are a calculated pressure tactic in its standoff with both the U.S. and EU. Beijing is feeling the squeeze from the Trump administration's hardline trade policy. If Washington fails to shrink its massive trade deficit and restore U.S. industrial capacity, Trump's economic agenda is toast.
Beijing faces its own nightmare scenario. To appease U.S. demands and cut trade surpluses, it would need to let the yuan rise—risking domestic unrest. A more affluent middle class might start demanding political influence. That's a nightmare for China's authoritarian elite.
At the same time, the economic foundation of Communist Party rule is crumbling. China's domestic economy is faltering, its real estate and industrial sectors flashing recession signals. The Party's once-effective social contract—'stay out of politics and we'll deliver prosperity'—is losing credibility amid youth unemployment and economic stagnation.
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