The United States (US) and China are locked in a high-stakes standoff over rare earth minerals and semiconductors, with each country targeting the other’s critical supply chains in the latest phase of their ongoing trade conflict. Recent US efforts to further restrict Chinese access to semiconductors have prompted Beijing to retaliate by curbing rare earth mineral exports to the US. As tensions escalate, both sides have announced new increases in port fees for each other’s vessels.

For several years, the US has worked to restrict China’s access to advanced semiconductors and related chips in an attempt to slow Beijing’s technological and military advancement. Earlier this month, lawmakers in Washington pushed for even deeper restrictions. In response, China announced last week that it would limit US access to rare earth minerals – materials essential for technology and defence industries.

The US and its allies in Taiwan and South Korea dominate global chip manufacturing, while China leads the world in rare earth mining and production. Both rare earths and semiconductors are considered vital ingredients in the race for supremacy in technology, military power, and artificial intelligence. Behind the scenes, both superpowers are pouring billions into their domestic industries in a bid to reduce dependence on the other.

Explaining the move to tighten rare earth controls, China’s Ministry of Commerce this week highlighted the military applications of these materials, stating: “Announcement of export control measures on rare earths and related items is a legitimate action by the Chinese government…In the context of turmoil and frequent military conflicts in the world, China has taken note of the important uses of medium and heavy rare earths and related items in the military field. China, as a responsible major country, employs export controls on related items according to the law, in order to better defend world peace and regional stability.”

The ministry also stressed that non-military use would not be restricted: “China’s export controls are not export bans. Licenses will be granted for eligible applications…Going forward, the Chinese government will conduct reviews in accordance with laws and regulations, grant licenses to eligible applications, as well as actively consider the applicability of facilitation measures such as general licenses and license exemptions to effectively promote legitimate trade…All applications of compliant export for civil use can get approval, so that relevant businesses have no need to worry.”

In response, the US indicated that it may impose 100% import tariffs on Chinese exports.

China responded by citing the semiconductor restrictions and accused the US of double standards: “China has taken note of the situation…The U.S. remarks reflect textbook ‘double standard’. For a long time, the U.S. has been overstretching the concept of national security, abusing export control, taking discriminatory actions against China, and imposing unilateral long-arm jurisdiction measures on various products including semiconductor equipment and chips…These measures…have seriously harmed the legitimate and lawful rights and interests of companies, severely disrupted the international economic and trade order, and gravely undermined the security and stability of global industrial and supply chains.”

China added: “The U.S. actions have severely harmed China’s interests and undermined the atmosphere of bilateral economic and trade talks, and China is resolutely opposed to them…Willful threats of high tariffs are not the right way to get along with China. China’s position on the trade war is consistent: we do not want it, but we are not afraid of it…If the U.S. insists on going the wrong way, China will surely take resolute measures to protect its legitimate rights and interests.”

Following what it viewed as Chinese intransigence, the US subsequently announced steep new port fees for Chinese vessels. In response, the Chinese government said it would reciprocate: “The USTR [United States Trade Representative] announced [that the US will] impose port fees on related Chinese vessels from October 14. The U.S. practice severely violates the WTO [World Trade Organisation] rules and breaches the principle of equality and mutual benefit of the China-U.S. Maritime Transport Agreement, and is a typical act of unilateralism…In order to safeguard its legitimate and lawful rights and interests, China has to take countermeasures and decides to charge special port fees on U.S.-linked vessels.”