Normally I wouldn't post such a wall o'text, but this is well worth adding to the discussion.
This comes from Bernhard's Moon of Alabama site, posted 10/11/25 (
link). (There are a lot of links in the original which I've omitted, so go there if you want references to quotes.)
This is not my writing.
U.S.-China Trade War Reaches New LevelTrump’s tariff war has somewhat settled down but for China.
Trump has, like his predecessor, limited exports of high-end semiconductor chips to China. He also stopped the export of machines and chemicals used to produce chips to China. These measures are extra-territorial. The Dutch company ASML is prohibited to sell its high-end machines for chip production to China because parts of them contain goods or software made in the U. S. of A.
After Trump imposed additional high tariffs on goods from China the country hit back by limiting exports of rare earth elements. China has a near monopoly on these elements. These are needed to produce modern electric motors, magnets and various sensors and semiconductors the U.S. needs. China has also stopped the import of soy-beans, one of the main products U.S. mid-west farmers depend on.
Trump had to pull back and did so. Tariffs were temporarily lowered and negotiations with China continued. A new trade agreement was supposed to signed later this month when President Trump and President Xi would meet in South Korea.
But U.S. negotiators under Secretary of Commerce Howard Lutnick tried to play hardball. In late September, during the talks, they imposed further restrictions on China:
On September 29, 2025, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) released a long-anticipated interim final rule (IFR) that will result in the most dramatic expansion of U.S. export control regulations in years. The IFR, “Expansion of End-User Controls To Cover Affiliates of Certain Listed Entities,” extends export restrictions to any company owned 50% or more, directly or indirectly, by any of the thousands of entities already designated on several Commerce and Treasury Department lists.
The IFR would also impose a new duty on exporters to investigate the ownership of an end user where there is reason to believe a designated entity holds a minority stake, or is affiliated with, the end user, subject to a strict liability standard for violations.
The new measures would severely restrict any export of high tech goods to China.
The country responded in kind:
Chinese Commerce Ministry (MOFCOM) announced on Thursday that in order to safeguard national security and interests, the ministry will impose export controls on rare earth-related technologies, including rare earth mining, smelting and separation, magnetic material manufacturing, and rare earth secondary resource recycling.
…
Technologies and relevant date related to rare earth mining, smelting and separation, metal smelting, magnetic material manufacturing, and rare earth secondary resource recycling, as well as the assembly, debugging, maintenance, repair, and upgrade of related production lines are prohibited from export without permission, the statement said.
Rare earth elements are used in many U.S. weapons. Each F-35 fighter jet includes some 418 kilogram of rare earth elements, a U.S. destroyer 2,600 kg, a nuclear submarines 4,800 kg. The U.S. has currently no means to produce these themselves.
There was more to the new Chinese regulation than it seemed:
This is actually big, potentially huge, notably because China’s new rare earth export controls include a provision (point 4 here: https://mofcom.gov.cn/zwgk/…) whereby anyone using rare earths to develop advanced semiconductors (defined as 14nm-and-below) will require case-by-case approval.
Which effectively gives China de-facto veto power over the entire advanced semi-conductor supply chain as rare earths are used at critical steps throughout – from ASML (who use rare earths for magnets in their lithography machines: https://asml.com/en/news/storie…) to TSMC.
The export controls are also extra-territorial: foreign entities must obtain Chinese export licenses before re-exporting products manufactured abroad if they contain Chinese rare earth materials comprising 0.1% or more of the product’s value.
So China is effectively mirroring the US semiconductor export controls that were used against them, with its own comprehensive extraterritorial control regime, except with rare earths.
The most advanced semiconductors produced today also use some rare-earth elements. Under China’s new rules each chip sale will need to be licensed by China to ensure that it will not be used for military purposes. If the new rules are handled strictly the U.S. AI-boom will soon go bust.
Rare earth are not the only field where new Chinese export rules are set to apply:
Not only did they announce the unprecedented rare earths restrictions that I posted about earlier 👇 (targeted, among others, at the advanced semiconductors sector) but they issued 4 consecutive announcements in total with other export controls on:
– The machines and expertise to process rare earths – not just the rare earths themselves, but all the specialized equipment and technical know-how to turn rare earth into usable materials (obviously making it all the harder to try to move rare earth processing away from China)
– High-performance batteries – specifically those above 300 Wh/kg needed for long-range EVs and advanced drones. And, again, export controls on all the factory equipment to make them too.
– The materials inside batteries – both graphite anodes and cathode materials (the two electrodes that are essential for batteries to function at all). Export controls also cover the specialized equipment to manufacture all of these components.
– Industrial diamonds and cutting tools – the ultra-hard materials that are used ubiquitously in precision manufacturing, for instance to cut silicon wafers for computer chips
This is absolutely unprecedented. With this China effectively gets veto power over three critical supply chains simultaneously: advanced semiconductors (via rare earths and related equipment), battery-powered vehicles and drones, and precision manufacturing across industries (via superhard materials).
It will all officially take effect on November 8, in one month.
China’s move is not really aimed at restricting exports. It just wants to discipline U.S. trade negotiators and push them back in support of free trade:
During the last round of negotiations with senior American officials in Madrid last month, China’s chief trade negotiator, Vice Premier He Lifeng, asked for the full removal of tariffs and export controls, The Wall Street Journal has reported. The latest rare-earth action, the people said, is a tactic aimed at achieving that goal.
The U.S. has yet to get understand that. Its response to China’s latest move as predictable as it is doomed to fail:
Donald J. Trump @realDonaldTrump – Oct 10, 2025, 20:50 UTC
It has just been learned that China has taken an extraordinarily aggressive position on Trade in sending an extremely hostile letter to the World, stating that they were going to, effective November 1st, 2025, impose large scale Export Controls on virtually every product they make, and some not even made by them. This affects ALL Countries, without exception, and was obviously a plan devised by them years ago. It is absolutely unheard of in International Trade, and a moral disgrace in dealing with other Nations.
Based on the fact that China has taken this unprecedented position, and speaking only for the U.S.A., and not other Nations who were similarly threatened, starting November 1st, 2025 (or sooner, depending on any further actions or changes taken by China), the United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying. Also on November 1st, we will impose Export Controls on any and all critical software.
It is impossible to believe that China would have taken such an action, but they have, and the rest is History. Thank you for your attention to this matter!
DONALD J. TRUMP
PRESIDENT OF THE UNITED STATES OF AMERICA
China is well prepared for that move. Its GDP this year will be around 20 trillion. Its total exports per year to the U.S. are around $500 billion, a mere 2.5% of its GDP. China can do without those while the U.S. can not.
What Trump does not get yet is that the U.S. depends more on imports from China than China depends on exporting to the United States. But the markets do understand that. Trump’s move may well be the black swan event that will lead to their crash.
If Trump doesn’t chicken out of this fight the U.S. economy is doomed.
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