President Donald Trump recently announced exemptions for smartphones, laptops, semiconductors, and other consumer electronics from his escalating global tariffs. These products, primarily manufactured in China, are excluded from the 125% tariff imposed on Chinese goods and the universal baseline 10% tariff. However, they remain subject to earlier tariffs, such as the 20% duty tied to China's alleged role in the fentanyl trade.

This decision is seen as a strategic move to shield tech giants like Apple, Dell, and Nvidia from significant price hikes that could arise due to increased manufacturing costs. The exemptions include modems, routers, flash drives, and semiconductor production equipment—items critical to the tech industry but largely not made in the U.S.. While Trump aims to encourage domestic manufacturing, critics argue that producing items like iPhones entirely in the U.S. remains unrealistic.

The exemptions come amid broader tariff escalations targeting Chinese imports and global trade partners. Trump’s tariff policies have sparked significant market volatility, with stock markets rallying following temporary pauses or adjustments in tariff rates.

Rare earth elements, a group of 17 metals, are essential for advanced technologies such as electric vehicles, semiconductors, and military hardware like missiles and fighter jets.

With China dominating over 85% of the global refining capacity and two-thirds of mining output, its recent export restrictions have amplified tensions with the West.

In response to escalating trade tensions with the United States, China has imposed export controls on critical rare earth elements such as dysprosium and yttrium. These metals are indispensable for stabilizing magnets in extreme conditions (used in engines and missiles) and for radar systems and lasers.

The restrictions, announced in April 2025, are seen as a direct retaliation against U.S. tariffs on Chinese goods. Such measures echo China's 2010 embargo on rare earth exports to Japan during a maritime dispute, underscoring its history of leveraging resource dominance for geopolitical advantage.

The U.S. and Europe face significant risks due to their reliance on Chinese rare earths. These materials are not only crucial for defence manufacturing but also for high-tech industries like AI systems, electric vehicles, and medical devices. For instance, the U.S.'s Next Generation Air Dominance (NGAD) fighter jets could be jeopardized by supply disruptions. While countries like Japan have stockpiled rare earths since the 2010 crisis, the U.S. has largely failed to do so, leaving industries vulnerable to sudden supply shocks.

China's restrictions have already caused price surges in critical minerals. Dysprosium oxide now trades at $204 per kilogram, while antimony prices have quadrupled since 2024 due to export controls. Other metals like hafnium and rhenium—used in jet engines and medical implants—are also experiencing steep price increases. These price hikes are straining industries worldwide, including Europe's military build-up efforts.

The U.S. is taking steps to counter China's dominance through domestic initiatives like the Defence Production Act and efforts to streamline mining permits on federal lands. Companies such as US Critical Materials are exploring domestic reserves of rare earths like gallium in Montana.

However, experts warn that building a self-sufficient supply chain will take years due to the complexities of mining and refining these elements.

China's actions highlight its broader strategy to maintain dominance over critical mineral supply chains while countering Western initiatives to diversify sources. The West has made some progress in processing "light" rare earths but struggles with "heavy" ones due to China's technological edge in refining processes.

This dynamic is reshaping global trade blocs as nations scramble to secure independent supplies of these strategic resources.

In conclusion, China's grip on rare earth metals has turned these once-overlooked materials into powerful tools of economic and geopolitical influence. The current crisis underscores the urgent need for diversified supply chains and strategic reserves to mitigate future risks in an increasingly fragmented global landscape.

ET News