America’s campaign to deny China advanced semiconductors has produced its mirror image, a Chinese licensing regime for rare earths that now sits astride the industrial bloodstream of the West.
Four years after Washington first restricted exports of advanced chips and the tools that make them, the world’s two largest economies have settled into a strange equilibrium.
Each holds a chokepoint the other cannot quickly replace. Each has learned to squeeze it just hard enough to extract concessions without triggering rupture. The result is less a trade war than a hostage exchange, conducted through customs paperwork.
The American side of the ledger has grown quieter but sharper. In 2025 the Department of Commerce led Washington’s technology offensive against Beijing. In 2026 it finds itself recalibrating as the White House prioritises stable trade talks, downplaying the issue publicly while approving higher-tier chip exports and suspending further restrictions.
The policy has swung with disorienting speed. Within twelve months the administration banned Nvidia’s H200, unbanned it, attached a 25% tariff to it, and replaced long-standing exemptions with annual licences for TSMC, Samsung and SK Hynix fabs operating in China.
What Washington gave with one hand it took with the other. The Bureau of Industry and Security opened 2026 with an enforcement surge, converting long-running investigations into penalties, almost all involving shipments to SMIC, China’s premier foundry.
In June the government affirmed that its chip restrictions apply to subsidiaries of Chinese companies located outside China, closing a loophole that had let hardware slip through third countries. Congress, meanwhile, wants the screws tightened further.
The House Foreign Affairs Committee has advanced a raft of export control bills, including the Chip Security Act, which would require companies to verify that AI semiconductors remain in authorised locations.
Beijing’s answer has been to reach for the periodic table. In April 2025 it launched a strict licensing regime for rare earths aimed at sectors feeding defence and high-tech industries, covering seven medium and heavy elements including dysprosium and terbium, the ingredients of heat-resistant magnets in missiles, drones and electric motors.
A second, more sweeping package followed in October 2025, extending controls to five additional rare earths as well as refining and magnet-making equipment, including certain foreign-made products using Chinese materials or processing technology, with categorical denials for defence-related end use.
That package was suspended for a year after a trade truce, and the suspension expires on 10 November 2026, with supply data showing limited progress in reducing global dependence. The clock, in other words, is Beijing’s to run.
The suspension has not meant quiet. In June 2026 China added ten American entities to its export control list, including the rare earth miners MP Materials and USA Rare Earth, a pointed jab at the very firms Washington is nurturing.
By late July it had blocked shipments of dual-use materials to 14 firms across the European Union, and the International Energy Agency warned that full enforcement of China’s rules could…
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