Bessent, Greer Condemn China’s Rare-Earths Rules, Cite Hope for De-escalation

Treasury Secretary Scott Bessent. (Kevin Dietsch/Getty Images)

Key Points

• China’s decision to increase curbs on rare-earth metal exports is viewed by U.S. officials as an attempt to control global supply chains.
• Treasury Secretary Scott Bessent expressed optimism for de-escalation through discussion, despite calling China’s move “highly provocative.”
• President Donald Trump has threatened 100% tariffs on China in response to the new export controls, which have yet to take effect.

U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent condemned China’s decision last week to step up curbs on its exports of rare-earth metals, calling the actions part of a broader plan by Beijing to control the world’s supply chains.

Though Bessent described China’s actions as a “highly provocative move” during a Wednesday press conference, he said that as of Tuesday night, President Donald Trump still planned to meet with Chinese leader Xi Jinping in South Korea at the end of the month. Greer also noted that China’s export controls haven’t been implemented, nor has the U.S. moved forward with its tariff threats, leaving room for a de-escalation.

Investors are still betting on an off-ramp, with markets moving higher after the officials spoke with reporters on Wednesday. The S&P 500 was up 0.9% in late morning.

“I believe China is open to discussion, and I am optimistic that this can be de-escalated ultimately,” Bessent said. “We’ve had substantial communication with the Chinese over the past few days, and we believe that there will be more forthcoming this week.”

Since many semiconductor chips have these critical minerals —they are used in products ranging from smartphones and household appliances to automobile components—the new restrictions would effectively give China more control over chips and the entire global supply chain. President Donald Trump on Friday threatened to levy 100% tariffs on China in the wake of China’s latest announcement of export controls.

China’s Ministry of Commerce, however, has said the controls were part of legitimate measures taken to strengthen its export-control system and better safeguard national security.

“China’s position has been consistent and clear. It is the U.S. who asks for talks while threatening high tariffs and new restrictions,” Lin Jian, spokesperson of China’s Ministry of Foreign Affairs, said in a social media post on Wednesday.

“We urge the U.S. to correct its wrong approach as early as possible and address relevant issues through dialogue and consultation on the basis of equality, respect and mutual benefit,” Lin’s post said.

Greer said the U.S. won’t stand for these moves from China, but noted that the expectation is that China won’t implement this rare-earth export-control regime. The scope and the scale of such an action by the Chinese is “just unimaginable, and it cannot be implemented,” Greer said. He said he expects that U.S. and China will return to where trade talks were a week ago, with the tariff levels and flow of rare-earth magnets that had been agreed upon.

“I think de-escalation is still the path. It does not seem like the U.S. has a clear strategy of escalation and the market is certainly a constraint,” said Rory Green, head of China research for TS Lombard, in an email.

That said, the two U.S. officials took a much harsher tone against China in their latest remarks. It was a marked change from more amicable comments in recent months, before the latest flare-up.

Both U.S. officials said that an existing U.S. deal reached in Geneva with China called for the countries not to levy new tariffs on each other, and included an agreement that exports of rare earths would continue to flow.

“China’s announcement is nothing more than a global supply chain power grab,” Greer said. “This move is not proportional retaliation. It is an exercise in economic coercion on every country in the world.”

Bessent portrayed the latest restrictions as a repudiation of everything that the U.S. and China have been working on for the past six months and noted the move impacted the rest of the world.

He also cited the situation as bolstering the case for the president’s use of the International Emergency Economic Powers Act, saying the U.S. needs it to “push back against this Chinese overreach against the world.” The Supreme Court is set to hear whether the administration has overstepped in its authority to use IEEPA after lower courts ruled that tariffs based on it were illegal.

Henry Gao, a law professor at Singapore Management University who has researched China trade policy, said in an email that the latest moves amount to efforts by both sides to build leverage ahead of the possible Xi-Trump meetup.

“Aware of how sensitive the U.S. stock market is to supply-chain risks, Beijing sought to increase its bargaining power by announcing new export restrictions on rare earth elements, signaling that it could weaponize strategic materials if necessary,” Gao wrote. “However, such tactics are effective only once: They may create short-term pressure but ultimately harden Washington’s resolve to secure its own supply chains and reduce dependence on China.”

The moves follow a familiar pattern in U.S.-China negotiations of “limited escalations, symbolic retaliations, and carefully timed policy signals designed to probe the other side’s bottom line,” Gao said. He expects the pattern to continue into 2026.

“I think the right question is how much pain is the U.S. willing to take? China won’t be backing down here,” Louis-Vincent Gave, head of Gavekal Research, said in an email.

China not only retaliated, but amplified the crisis. Gave said. But by the time Seoul comes around, it will likely “be all hugs with Xi,” he added.

For the companies caught in the middle, the latest news just creates more uncertainty. In a recent survey, Deloitte found that about 48% of chief financial officers planned to pass cost increases on to customers, while 44% planned to absorb them.

For investors, the key signpost is whether Trump and Xi meet later this month at the Asia-Pacific Economic Cooperation summit in Seoul.

“The desire for the leaders to meet is a key action-forcing event to de-escalate,” said Michael Hirson, head of China research for 22V Research. “An off-ramp is not necessarily easy but is politically feasible.”

He still expects de-escalation.

Write to Megan Leonhardt at megan.leonhardt@barrons.com and Reshma Kapadia at reshma.kapadia@barrons.com