US Warned Of China Rare Earth Curbs If Section 301 Tariffs Expand

The Phase One Agreement, signed in Washington in January 2020 by Trump and Chinese Vice Premier Liu He, required China to increase purchases of US goods and services by US$200 billion above 2017 levels by 2021. However, Beijing largely stopped fulfilling its promises during former US President Joe Biden's administration, from early 2021 to 2025, until Trump returned and imposed tariffs of up to 145% on Chinese goods last April.

To de-escalate the situation, China resumed significant purchases of US soybeans in late 2025 after a trade truce between Trump and Xi, committing to buy at least 12 million metric tons by early 2026, with further purchases expected through 2028. Tensions have risen again with the new round of Section 301 probes.

Although the Commerce Ministry did not specify in its latest comments what“necessary measures” it might take, Chinese commentators said the reference to the Phase One Agreement suggests that suspending purchases of US soybeans could be an option. They also added that China might consider using its rare-earth card.

A Henan-based columnist writing under the pen name“Weihang Duwang” says Washington is under pressure from rising fuel prices and domestic political constraints ahead of the mid-term elections in November.

“What has pushed Washington to resort to these tactics? First is oil prices. Tensions in the Middle East have pushed US gasoline prices up by 19% to about US$3.54 per gallon, shaking Trump's support from his voters,” he writes.“The second factor is last month's Supreme Court ruling, which stated that the president cannot freely impose tariffs under an economic emergency.”

He says Trump launched Section 301 investigations against 16 trading partners to pressure them into concessions and ease economic pressure at home. He says the probes are also meant to create bargaining chips for the US ahead of Trump's planned visit to Beijing, where rare earths and soybeans are expected to be key issues.

“China has already fulfilled its commitment to purchase about 12 million tons of US soybeans earlier this year, but buying slowed sharply after February,” he says.“US military operations in the Middle East are rapidly depleting American stockpiles of ammunition, increasing demand for critical minerals in which China plays a dominant role.”

You Danhong, a Shandong-based writer, says the US remains heavily dependent on Chinese rare earth elements for key defense technologies.

“Military media have reported that some components in the US F-35 stealth fighters use alloy magnets produced in China,” he says.“Industry experts estimate that US defense contractors may only have a few months of rare-earth stockpiles, not several years. If supplies are disrupted, costs will surge while some production lines could even stop.”

“The US wants to build an alternative supply chain, but it's easier said than done,” he says.“Opening mines, building processing plants, meeting environmental rules and training workers could take five to 10 years.”

“The USTR investigation lists industries such as steel, batteries, semiconductors and automobiles,” he says.“But all of them depend on critical materials like rare earths. When Washington talks about other countries' excess capacity, it may forget that the supply of rare elements is not fully under its own control.”

The US Supreme Court ruled on February 20 that the International Emergency Economic Powers Act (IEEPA) does not allow the president to impose such duties. Trump responded by ordering a temporary 10% tariff on all countries for 150 days under Section 122 of the Trade Act of 1974, meaning the administration must finish the Section 301 probes by July 20 to impose new tariffs.

The 16 economies targeted by the investigations ae China, the European Union (EU), Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan and India.

“China maintains a global goods trade surplus across its economy, led by exports in sectors such as electronic equipment, machinery, automobiles and auto parts, plastics, furniture, iron and steel products, apparel, organic chemicals, toys, optical and medical equipment, footwear, ships and aluminum,” the USTR said.