Over the past three years, Washington has asserted sweeping power to enforce global rules that ban companies anywhere in the world from sending cutting-edge computer chips or the tools needed to make them to China. American officials have argued that an approach is needed to ensure China does not gain the upper hand in the race for advanced artificial intelligence.
But a sweeping set of restrictions announced by Beijing last week showed that two can play this game.
The Chinese government expanded its own influence over global supply chains as it announced new rules restricting the flow of critical minerals used in everything from computer chips to cars to missiles. The rules, set to take effect later this year, shocked foreign governments and companies that may now have to obtain licenses from Beijing to trade their products outside China.
With its dominance in the production of these rare earth minerals and its control over other strategic industries, China could have an even greater ability than the United States to weaponize supply chains, analysts say.
“The U.S. must now confront the fact that it has an adversary that can threaten significant parts of the U.S. economy,” said Henry Farrell, a political scientist at the Johns Hopkins School of Advanced International Studies. The United States and China are now clearly “in a much more delicate phase of interdependence,” he added.
“China has really started to figure out how to model itself on the rules of the U.S. game and, in some ways, play this game better than the U.S. is currently playing it,” Farrell said.
China's move has reignited tensions between the world's two largest economies. President Trump threatened to increase already significant tariffs on Chinese imports by imposing an additional 100 percent tax on November 1 unless Beijing backs down from its new restrictions.
The type of supply chain restriction that China is implementing first came into play in 2020. Washington has scrapped an obscure provision called the Foreign Direct Product Rule to target Chinese tech giant Huawei, which the U.S. government viewed as a national security threat. But rather than restricting American technology exports only to Huawei, the United States declared that no company in the world could supply a product to Huawei if it contained U.S. parts or was made with U.S. equipment or software.
Because of the United States' key role in the global chip manufacturing industry, the rules covered essentially all advanced technologies. It was a sweeping exercise of U.S. economic power that became the basis for a set of global technology rules during the Biden administration. Although foreign governments were uncomfortable being told what to do, many cooperated out of fear of being cut off from U.S. technology.
The question now is: Will China's restrictions push the Trump administration to roll back its tariffs or long-standing technology restrictions, or will China's government cave under the pressure first?
The administration appeared surprised by China's restrictions, which could cripple American industry. Mr. Trump threatened on Friday to cancel a planned meeting with Chinese leader Xi Jinping and impose a 100 percent tariff. After the stock market plunged, the president posted on social media Sunday: “Don't worry about China, everything will be fine!”
On Tuesday, Mr. Trump renewed his remarks, telling a crowd of reporters and Argentina's president that Mr. Xi “gets irritated because China likes to take advantage of people and they can't take advantage of us.” This afternoon, Mr. Trump wrote on social media that the United States was considering halting cooking oil imports from China and possibly other deals.
On Wednesday morning, Treasury Secretary Scott Bessent and Jamieson Greer, the U.S. trade representative, called China's licensing system a global power grab and said the United States was prepared to raise its tariffs if China moved forward.
“We expect this will never come into effect,” Mr. Greer said.
Chinese officials have long criticized America's extraterritorial enforcement of economic measures and insist Beijing has acted consistently in the face of renewed threats from Washington.
“The United States, on the one hand, is talking about engagement, but on the other hand, it is resorting to threats and intimidation, imposing high tariffs and introducing new restrictive measures,” Lin Jian, a Chinese Foreign Ministry spokesman, said on Wednesday. “This is not the right way to engage with China.”
Jiang Tianjiao, an associate professor at Fudan University, said Chinese officials had noted recent efforts by the United States to restart its own rare earths industry and that they wanted to assert their influence ahead of a possible meeting between Mr. Trump and Mr. Xi.
U.S. officials and analysts said the impact of China's licensing system was much broader than U.S. technology controls, which only targeted more advanced computer chips.
Some analysts point out that China's efforts to weaponize supply chains predated U.S. chip controls. Concerned about being dependent on hostile nations for oil and technology, the government has been implementing plans to build strategic industries for decades. And in 2010, China stopped exporting rare earths to Japan during a maritime dispute.
It is not clear when Chinese officials began developing the rare earth licensing system. But Mr. Trump's aggressive actions — including new fees on Chinese ships docking at U.S. ports — have given Beijing an opportunity to try out those measures.
After Trump imposed additional 34 percent tariffs on China in April, Beijing introduced an initial licensing system for rare earths for exports to automakers and the defense industry. U.S. companies panicked as mineral supplies dwindled. Ford Motor and other automobile manufacturers partially stopped production. Mr. Trump responded by expanding his tariffs to at least 145 percent, halting much of the trade between the countries.
At meetings this spring and summer, the countries restored a fragile truce, with the United States cutting tariffs and China making it easier to export minerals. But the United States continued to impose technology controls, prompting painful countermeasures from China.
China's much more expansive mineral licensing system followed a move by the United States on September 29 to extend trade restrictions to the subsidiaries of all companies on the so-called Entity List, which restricts the type of US technology they can buy.
Analysts say Chinese officials viewed the move as a pause in a tentative turnaround after Mr. Trump spoke by phone with Mr. Xi less than two weeks earlier and said they had agreed to a tentative agreement to divest TikTok's U.S. operations from its Chinese parent company.
Beijing also responded with other restrictive measures. It announced controls on equipment needed to make batteries for electric cars, launched an anti-monopoly investigation into U.S. chipmaker Qualcomm, imposed additional port fees on U.S. ships and added several American companies to a restricted trade list.
But the mineral restrictions are notable for the authority they give Beijing to control the world's supply of tiny chips that power virtually all electronics.
“It scares the rest of the world how far China is willing to upend the global supply chain,” said Xiaomeng Lu, director of the Eurasia Group, a policy advisory and research group in Washington.
Chris Miller, a professor at Tufts University and author of “Chip War: The Fight for the World's Most Critical Technology,” said the impact of China's new licensing system could be “extraordinarily far-reaching,” affecting nearly all semiconductors manufactured worldwide.
Companies and governments in the United States, Europe, Japan, India, South Korea and elsewhere are also concerned about the extensive corporate information that the Chinese government requires in the licensing process.
Dr. Miller expected “a lot of resistance” to providing this information and said it could accelerate efforts to establish non-Chinese supply chains for rare earths. The argument is similar to one that critics of U.S. technology controls have long made, that they could push the world to adopt non-American chip technology.
The United States and China each use a supply chain that the other has struggled to strengthen domestically for years. But while China has poured billions into its chip industry, fueling the growth of its own chipmakers, it could be years before the U.S. resumes production of rare earths.
“If China is able to get around chip restrictions but the U.S. takes longer to get around rare earth controls, that will be a big problem for the United States,” said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics.
Yeling Tan, a professor at Oxford University, said the events of the past few months have put China in a stronger negotiating position than it was during the first Trump administration. But she said the controls “could be costly for China as the extraterritorial requirements could worry other trading partners.”
“This threatens to undermine China’s credibility as a reliable trading nation,” she said. “It’s an incredibly delicate balance to find.”
Xinyun Wu and Amy Chang Chien reported from Taipei, Taiwan.