Oil prices fell sharply this week after US President Donald Trump announced a 100 per cent tariff on Chinese imports, reigniting fears of an economic decoupling between the world’s two largest economies.
In response, Beijing expanded its rare-earth import controls, a move seen as a signal of China’s intent to leverage dominance over critical supply chains ahead of the 90-day trade truce deadline.
Rystad Energy warned that the deepening rift could accelerate a structural separation of the two powers if current trends persist.
“For investors, the risk is less about the harsh diplomatic tone than the underlying strategic decoupling – the US and China are now risking a breakup, with each side trying to achieve a position of strength by threatening to inflict greater damage on the other,” said Claudio Galimberti, chief economist and global market analysis director at Rystad Energy.
“China’s decision to leverage rare-earth exports, an area where it still controls around 70 to 80 per cent of global refining capacity, highlights the current strategic vulnerability of US supply chains.”
Galimberti noted that despite years of escalating trade tensions, China has, until recently, kept rare-earth shipments to the US steady, showing restraint on both sides in a strategically critical arena.
He added that such restraint has now ended, as Beijing’s new minerals control list zeroes in on advanced magnet and semiconductor-grade materials vital to defence and electric-vehicle production — sharply increasing supply disruption risks if post-November negotiations break down.
The consequences, he emphasised, could not be higher.
China currently supplies around 80 per cent of total US rare-earth imports, with Malaysia and Estonia providing most of the remainder.
Although the US mines small volumes from California’s Mountain Pass site, it still lacks major refining capacity, leaving domestic industries heavily exposed to Chinese processing capabilities.
Financial markets responded swiftly to the renewed trade brinkmanship.
US equities slid sharply late last week before staging only a modest recovery, while Asian currencies weakened and gold prices surged past US$4,200 per ounce — a rise of more than 50 per cent since the start of the year — as investors sought refuge from mounting geopolitical and fiscal risk.