China’s Coercive Use of Rare Earths Will Weaken Its Monopoly: Former IMF Chief Economist

Oct 20, 2025 - 09:49 Updated: Oct 19, 2025 - 23:47

China’s Coercive Use of Rare Earths Will Weaken Its Monopoly: Former IMF Chief Economist

News Analysis

Just as the U.S.–China trade war appeared to be easing, China suddenly imposed its toughest restrictions on rare earths, shocking the Trump administration and global markets. However, the former chief economist of the International Monetary Fund said that in its attempt to negotiate better trade terms with the United States, Beijing is attempting to emulate President Donald Trump’s negotiating style. However, he said that in this trade war, China’s use of rare earths as a trump card will severely weaken its monopoly position as countries work to find other sources.

On Oct. 9, China imposed stricter restrictions on rare earth exports. The new export control measures announced by the communist regime’s Ministry of Commerce took effect on Thursday, requiring companies to obtain special approval to export rare earth products originating in China, even if they contain trace amounts of rare earths, including products produced overseas by non-Chinese companies.

The U.S. president expressed on social media his disappointment, calling China’s new restrictions “hostile.”

“This was a real surprise, not only to me, but to all the Leaders of the Free World. ... I will be forced, as President of the United States of America, to financially counter their move,” he wrote.

“There is no way that China should be allowed to hold the World ‘captive,’ but that seems to have been their plan for quite some time, starting with the ‘Magnets’ and, other Elements that they have quietly amassed into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least.”

Strategic Move in Preparation for Major Negotiations

Former IMF Chief Economist Kenneth Rogoff told The Epoch Times that Beijing’s move is a strategic one, preparing for upcoming major negotiations.

“Between President Xi [Jinping] and President Trump the trade negotiations aren’t over. They’re just beginning. A real trade agreement takes two or three years to work out the details,” he said.

He said he believes that China is mimicking Trump’s aggressive bargaining strategy.

“Just before when a negotiation seems to be settled, [Trump] raises the ante, he makes new threats,” Rogoff said. “So China is taking a page out of his book and doing the same thing.”

Rogoff is a professor of economics at Harvard University. He served as chief economist of the International Monetary Fund from 2001 to 2003.

For months, escalating trade tensions between China and the United States appeared to be cooling down, with phrases like “thaw” and “truce” replacing warnings of an economic “war.” However, the Chinese Communist Party’s (CCP) sudden rare earth restrictions shattered any illusion of peace.

Rogoff said the CCP wanted to boost its leverage before a major meeting with Trump.

“I think that Chinese leadership felt that it had not subsided, that it was left with a situation with very high tariffs, ongoing restrictions, and until a day or two ago, it seemed that Xi and Trump were about to meet, and they were trying to increase Xi’s bargaining power, and Trump’s doing the same thing, where he’s raising tariffs to 100 percent to raise his bargaining power,” he said.

“Nobody thinks it’s going to end up there. Often negotiations seem intractable until the last minute. And I think that’s what we’re looking at here. The two sides are posturing, but I don’t think we’re going to end up in this place.”

Rogoff is an elected member of the National Academy of Sciences and the American Academy of Arts and Sciences. He has long ranked among the top dozen most cited economists and is an international grandmaster of chess.

Rogoff’s 2025 book “Our Dollar, Your Problem: An Insider’s View of Seven Turbulent Decades of Global Finance and the Road Ahead” offers a sweeping view of the post-war rise of the dollar, the challenges the rest of the world has in dealing with it, and how this experience can help inform an evolving new global financial system.

He played out a chess game of a trade war centered on rare earths.

“If China only cuts off the United States, the United States will get the rare earth through third parties, just as Russia gets parts and goods through third parties. And if China cuts off everyone, it would be declaring a trade war on the whole world, which I don’t think it wants to do,” Rogoff said.

He said he therefore thinks China’s recent move is a negotiation tactic.

Rogoff said a meeting between Chinese and American leaders may be imminent, and it would be a very important one. Both sides are showcasing their respective pain points.

“China certainly has pain points. China’s economy is still very weak and probably growing slower than the official numbers represent,“ he said. ”The overbuilding and housing and infrastructure is going to take many, many more years to work its way out of the economy. China is in a state of near deflation. It has a lot of problems.”

China’s gross domestic product grew 5.2 percent year-on-year in the April–June quarter, down from 5.4 percent in the first quarter. June economic activity data also highlighted the pressures facing consumers. Retail sales growth slowed to 4.8 percent from 6.4 percent in May, the slowest pace since January–February. Producer prices fell at their fastest rate in nearly two years in June.

Despite multiple rounds of support measures, China’s sluggish real estate market continues to drag down overall economic growth. Real estate investment fell sharply in the first half of the year, and new home prices in June saw their biggest monthly drop in eight months.

CCP Faces a Tough Opponent

Rogoff said that in its trade negotiations with the Trump administration, China has found itself facing a very tough opponent.

“I thought it was quite interesting that President Xi said we’re willing to surrender some of the advantages that we were given as a developing economy when we entered the world trading system at the turn of the century. But in the case of the United States, they see they’re facing this very aggressive counterparty. So I view this as tactical. I don’t think this will last. I don’t think this is necessarily something that’s going to be true in a year,” he said.

China’s new rare earth restrictions are the most stringent ever.

Rogoff stated that this move by the CCP is highly destructive to the United States.

“I think this is one of the most painful things they can do because rare earths are required in electronics, military equipment, all kinds of things. And although the United States may someday produce its own rare earth, and although there are other countries where you can produce them, China has a lot of monopoly power. It’s found a pain point for the United States,” he said.

Trump once said that China would be the victim in a trade war because its exports to the United States far exceed those of the United States to China, while the CCP is trying to demonstrate its leverage through rare earths.

“China said, well, not necessarily because we have this incredible pain point of this essential good you can’t easily get somewhere else,“ Rogoff said. ”So it’s very damaging [to the U.S.], [Xi’s] showing the U.S. that he has bargaining power also. Trump isn’t holding all the cards.”

But Trump immediately responded with tariffs. On Oct. 10, Trump stated in a post, “Starting November 1st, 2025 (or sooner, depending on any further actions or changes taken by China), the United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying.”

However, Rogoff believes that this move may not be enough to deter the CCP.

“The U.S. is only 12 or 13 percent of China’s exports now. It’s diversified tremendously, and the U.S. depends on China for a very large fraction of its rare earths. So I think it’s a battle. I don’t know how it'll end, but two very strong personalities and two countries need to find a way to live with each other,” he said.

China Will Lose Its Monopoly

To avoid being strangled by the CCP, the U.S. government has begun cultivating the rare earth market through long-term investments. Until 2017, rare earths were not mined domestically in the United States. Following the U.S. Department of Defense’s support for the restart of the Mountain Pass mine in Southern California, the United States now supplies 12 percent of the world’s unprocessed rare earth supply.

In addition, the United States is preparing to open the Elk Creek mine in Nebraska, the Bell Lodge mine in Wyoming, the Round Top mine in Texas, a pilot processing plant in Colorado, a combined mining and processing facility at the Bokan mine in Alaska, and processing plants in Texas and California.

The U.S. Department of Energy is also funding research competitions to develop energy products that use fewer rare-earth minerals. Research into deep-sea mining and extracting rare earth elements from power plant coal ash and mining waste all show potential.

Rogoff stated that in the long term, the United States will develop rare earth resources in the United States, Chile, Argentina, and elsewhere, gradually establishing its own supply chain.

“Over time, China is going to lose its monopoly. But right now, it has a lot of bargaining power.”

“There exist rare earth deposits in other parts of the world, but because China was providing them at a low cost, these hadn’t been developed, but now they will be,” he said.

However, Rogoff noted that in the long run, the CCP will be affected by how it has used its rare earth monopoly.

“I can guarantee you that China’s monopoly position will be greatly weakened by its actions because, over time, countries will find other sourcing,” he said.