For the first time, China's economic power—measured by purchasing power parity, manufacturing output, and control over critical minerals—has shifted the global power balance. This gives President Xi a stronger negotiating position than his U.S. counterpart, as China can now weaponize economic dependencies more effectively.

While the US focuses on quarterly returns, China has spent decades investing in and controlling the supply chain for critical minerals essential for technology and defense, securing long-term leverage.

The shift to a less adversarial China policy may be a strategic maneuver to avoid supply chain disruptions. The U.S. appears to be biding its time—likely for 5+ years—to wean itself off dependence on Chinese rare earth minerals, which are critical for both industry and defense manufacturing.

China is leveraging its 90% control over rare earth processing not just against the US, but globally. By requiring licenses from any company worldwide, it creates a chokehold on high-tech manufacturing and establishes a new template for economic coercion.

China demonstrated its significant leverage over the U.S. by quickly pressuring the Trump administration through a partial embargo on rare earth metals. This showcased a powerful non-tariff weapon rooted in its control of critical mineral supply chains, which are also vital for defense applications.

After initially planning a hardline stance, the second Trump administration was checkmated by China’s control over rare earth minerals. This forced a significant policy climb-down, leading to concessions on export controls and attempts to mollify Beijing.

While headlines focus on advanced chips, China’s real leverage comes from its strategic control over less glamorous but essential upstream inputs like rare earths and magnets. It has even banned the export of magnet-making technology, creating critical, hard-to-solve bottlenecks for Western manufacturing.

China's global dominance isn't in owning mines, but in controlling the midstream refining and smelting processes. This creates a critical choke point for the West's supply of essential materials for defense, AI, and electrification, as they control 50-98% of processing capacity for key metals.

China is no longer just mirroring US trade restrictions in a tit-for-tat manner. It is now offensively mapping its own supply chains to identify and control global choke points, proactively weaponizing its dominance in critical materials and technologies to exert geopolitical pressure.