China holds more than ninety percent of the world's rare earth processing capacity, the U.S. side of defense industry, electric vehicle batteries, wind turbines, all of which can not be separated. In April 2025, China added export controls on seven medium-heavy rare earth elements and high-performance magnets, which directly matched the response of the new U.S. tariffs. The data showed that in May, the export of rare earth magnets fell 93.3%, to the U.S. exports dropped sharply from 246.3 tons in April to 46.4 tons, basically stuck in the neck.
As a result, domestic production in the U.S. is still in the beginning phase, MP Materials' California mining field to the Texas plant, the entire chain production capacity to the end of the year was not forced to extract 1000 tons of titanium titanium magnets, the top accounting for less than 1% of China's production in 2018.Lynas company took 1.2 billion federal funds to build a rare-earth plant, but it is still far from self-sufficiency.
In the blink of an eye, in September, the U.S. Congress couldn't sit still. On September 18th, John Mullenar, chairman of the US-China Strategic Competition Special Committee of the House of Representatives, wrote a letter directly to Trump, going straight to the point: using air channels as levers to force China to let go of rare earths. The letter did not beat around the bush and listed three actions: first suspend the landing permits of Chinese airlines at American airports, then the Pentagon quickly review the export control of commercial aircraft, and finally pull G7, Quad and NATO allies to follow up. Mullenar named China for using rare earths as a weaponization tool, and export restrictions directly hurt American electric vehicle batteries, missiles and wind turbines.
He also praised Trump's efforts to push allies' tariffs on China at the G7 a few days ago, saying that this time it has to be upgraded, and the aviation industry is a breakthrough. The number of Chinese flights landing in the United States is already small, and it is still sluggish in 2025 after the epidemic. However, more than 30% of Boeing orders are supported by the Chinese market, and hotels and duty-free shops also count on Chinese tourists. As soon as the letter was sent, Reuters reported it on the same day, with a straightforward title: U.S. lawmakers asked Trump to card China flights for rare earth access. Politicians are shouting loudly, but the foundation is weak. The U.S. federal debt has exceeded 36 trillion yuan in April, the interest snowball is rolling, and the state government budget is tight. How dare you really push all the cake out?
As soon as the letter arrived at the White House, the next day, September 19, the U.S. Treasury Department released a data bomb: China reduced its holdings of U.S. debt by US$25.7 billion in a single month in July, and its position slipped to US$730.7 billion, a record low since December 2008. This is not the first time. Since 2022, China has steadily reduced its position and weakened its reliance on US dollar assets. However, this wave in July was strong, and continuous small-scale operations avoided market shocks. The Global Times reported that this was a steady response to the continued pressure from the United States. U.S. debt is the anchor of dollar hegemony. As soon as China lets go, it will follow suit. In July, foreign countries bought US$58.2 billion in U.S. bonds as a whole, but China's share fell sharply. Canada also dumped US$57.1 billion. Japan and the United Kingdom barely topped the list, and the total number of holders still rose by 3.7%. Wall Street traders stared at the quote screen, and bond prices fell slightly by 0.02%, but in the long run, financing costs will have to rise. Soybean farmers in agricultural states in the United States are anxious. Orders are still hanging in 2025, 16 million tons of inventory are pressing warehouses, and price fluctuations are biting into cash flow. Boeing relies on China to increase the saturation of orders, and safety issues have been amplified. At this time, if it loses the market again, the delivery pace will be completely chaotic.
Trump was not idle. On September 20, he set conditions in the White House press room. Three things were clear: China should buy more soybeans, expand orders for Boeing aircraft, and relax export controls on rare earth. Agricultural states are under great pressure, and soybeans have to stabilize their ticket positions; the face of the manufacturing industry is preserved, and Boeing will deliver 30% of its products in China; rare earths are the lifeblood of the high-end industry, and the Ministry of Defense report directly points to the risk of shortage. He supported the table with both hands, and the reporter's shutter clicked, emphasizing that these were the pillars of the economy. The spokesperson of the Ministry of Foreign Affairs hit back at the regular meeting that day, reading the script on the platform, reaffirming the principle of reciprocity and not playing unilateral. The market responded quickly, with the Dow Jones down 0.5% in midday, and aviation stocks swayed. The matter of rare earths has deep roots. In 2010, China blocked Japan's exports. Back then, the Diaoyu Islands dispute was caused. Now it is the turn of the United States, which is on a larger scale. Once the controls were introduced in April 2025, global rare earth magnet exports plunged 74% to 1.2 million kilograms in May, reaching the level during the epidemic. Apple's recycling of rare earths has increased from 45% in 2021 to 73% in 2022, and it targets 100% recycling of all magnets by the end of the year. However, the defense industry is not as flexible as this. Submarines and fighter jets have thousands of pounds of rare earths, which will collapse if they lack them.
This game not only involves financial resources, but also involves the industrial chain. Mulenar Sinriti's G7 coordination, Trump had just pushed allied tariffs in the G7, but he had followed this up. In his letter on September 18, he also suggested reviewing aircraft exports. Boeing 737 and 787 rely heavily on the China market and recover slowly after the epidemic. Flight demand in 2025 is still low, but it is missing. China's gold reserves increased to US$208.6 billion in the first half of the year, and added another 1.9 tons in August. They bought and bought for ten consecutive months, using them as hard currency. The report of the People's Bank of China shows that this move has stabilized its volatility, and China is at the top of the global gold purchase list. On the technology side, some scenarios of self-developed chips have been launched to fill the gap. Although the gap exists, the ecology has made up for it. The public opinion field has rebounded sharply. American technology bosses said bluntly at the Silicon Valley forum that this set of restrictions is off the line and there is no right way to make up for the situation. Experts at the think tank meeting reviewed the report that with traffic rights blocked, maintenance parts were all in chaos, the shadow of the epidemic had not yet dissipated, and the fleet's capacity was already tight.