The US-China trade war seems to have subsided – but the sense of calm is misleading

The truce paused the immediate tariff escalation between Washington and Beijing. It extended the pause until next January and opened the possibility of a future trade deal. However, it addressed tariff fighting, not the deeper contest over technology, supply chains, and national security.

That contest continued on both sides. The United States tightened controls on technology exports, investment, and transfers, including advanced semiconductors and their manufacturing equipment. China retaliated by restricting rare-earth exports and magnets, which are vital for civilian and military industries. These measures work by denying rivals key inputs needed for economic and technological progress.

Today, Washington is funding domestic mineral projects while restricting China’s access to frontier chip technology. Beijing has expanded restrictions to artificial-intelligence chips and solar technology, and threatened countries reducing dependence on Chinese minerals. The International Energy Agency estimates a full rare-earth magnet cutoff could cost US and European economies about $1.5 trillion annually, showing why the truce is only a pause.

A supply-chain war uses trade and investment rules to make a rival’s economy less secure or less capable. Instead of attacking factories, countries try to control the materials, technology, money, and production links their opponent needs. It matters because economic dependence can become a tool of national security and military competition.

Last year, China restricted rare-earth exports and magnets after US tariffs and limits on advanced semiconductors. Those controls can slow American production because rare-earth magnets are essential to high-tech civilian and military products. The United States responded by funding domestic mining and processing, while restricting China’s access to advanced chips and chip-making machines.

The International Energy Agency estimates a Chinese blockade of rare-earth magnets could cost the United States and Europe about $1.5 trillion yearly. China also threatens countries that reduce their dependence, while Washington expands controls and mineral projects. A safer path requires agreeing which risks justify restrictions, rather than treating ordinary trade like wartime.

The conflict is a struggle over supply chains behind advanced technology, energy, and military power. The United States restricts China’s access to advanced chips, chipmaking machines, investment, and technology transfers. China restricts critical minerals, rare-earth magnets, artificial-intelligence chips, and some solar technology.

For example, China limited rare-earth exports and magnet shipments after Washington imposed tariffs and tightened semiconductor controls. These materials are vital to civilian and military products, so export limits can slow a rival’s factories and technology. Washington is responding by funding domestic mining and processing while blocking China from buying frontier-chip machinery.

Both governments now treat supply-chain control as national security, not ordinary commerce. The International Energy Agency estimates a Chinese cutoff of rare-earth magnets could cost the United States and Europe about $1.5 trillion annually. Continued pressure seems likely unless both sides agree which risks justify restrictions.

China could cost the US and European economies about $1.5 trillion per year by blocking rare-earth magnets. The estimate comes from the International Energy Agency and shows why supply chains have become a security issue. Rare-earth magnets are crucial components for high-tech civilian and military products.

Last year, China stunned the Trump administration by throttling rare-earth and magnet exports. It used the restrictions to retaliate against US tariffs and limits on advanced semiconductors. Because these magnets support civilian and military technologies, reduced supplies could disrupt production across major industries.

China has relaxed some controls but retains many others, and has used similar measures against countries it dislikes. The US is investing hundreds of millions of dollars in domestic mining and processing projects. Europe and America still face dependence risks, making a clearer agreement on legitimate security restrictions essential.

If critical minerals, advanced chips, or chipmaking equipment disappeared, civilian factories and military programs would face severe disruption. These inputs support electric vehicles, solar power, artificial intelligence, communications, and weapons, so shortages would spread through supply chains.

China’s rare-earth dominance shows the mechanism: restricting minerals and magnets can choke production elsewhere. Last year, China throttled exports after US tariffs and semiconductor controls, demonstrating how trade disputes can become supply attacks. The International Energy Agency estimates a blockade of rare-earth magnets could cost US and European economies $1.5tn annually.

Military systems could lose advanced computing, guidance, communications, and production, while civilian industries face closures and higher prices. Today, Washington is funding domestic mineral projects and tightening China’s access to frontier chips and manufacturing machinery. China is restricting high-tech exports too, making dependence reduction harder and raising the risk of wider economic conflict.

Trade can discourage conflict when countries depend on one another for essential goods and technology. Breaking those ties becomes costly, so cooperation becomes valuable. But dependence also creates leverage: a government can threaten to restrict vital supplies, turning ordinary commerce into pressure.

China’s rare-earth dominance shows the danger. Last year, it throttled exports of rare earths and magnets after US tariffs and technology restrictions. These materials support civilian and military industries, so limiting them can slow a rival’s economy and technological progress without firing a shot.

That is why both governments now treat supply chains as national-security assets. If China blocked rare-earth magnets, the US and Europe could lose about $1.5tn annually. Washington is funding mining and processing, while Beijing restricts high-tech exports. The result is less trust, duplicated supply chains, and greater risk that retaliation spills into military conflict. Peace therefore depends on agreed limits: genuine security threats may justify controls, but commercial competition should not be handled like wartime.