Rare Earth Rift: How the US and China are exacerbating global economic turbulence

The global economy has come close to a phase of deep turbulence. In recent weeks, there have been sharp economic fluctuations and instability in the financial sector, caused by the fierce struggle between the US and China for access to rare earth metals – raw materials that are critical to the development of modern technologies, the defense industry and energy. The confrontation between such financial heavyweights directly affects stock markets, oil prices and overall global economic stability, UNN writes.

US President Donald Trump has once again raised the stakes in the confrontation and increased the customs rate for China to 125%, from the previously announced duty of 104%. In response, the Celestial Empire raised tariffs on American goods to 84%. China has also restricted the export of rare earth metals.

Hong Kong’s Minister of Finance Paul Chan has already stated that the new tariffs imposed by the United States are harming international trade and could backfire on the Americans themselves. He added that the government would defend itself.

Fintech expert and co-founder of Ukraine’s first fintech ecosystem Concord Fintech Solutions Olena Sosiedka notes that there is now not just an economic confrontation between the US and China, but a fight for the future.

This is a new form of geopolitical confrontation, where raw materials are used as leverage on global processes. Whoever controls rare earth metals controls the future

China’s pinpoint strikeAfter another increase in US tariffs against China, the government of the Celestial Empire officially announced the restriction of exports of seven types of rare earth metals, including terbium, samarium, praseodymium, neodymium and others. They are used in the production of semiconductors and microchips. In addition, rare earth metals are needed for the manufacture of military equipment and weapons, radars, and guidance systems. They are used in the creation of electric motors and batteries for electric vehicles, as well as equipment for “green” energy, such as solar panels, and medical equipment.

Currently, China has a monopoly in the rare earth metals market, controlling up to 70% of global production and more than 90% of global processing capacity.

Restricting the export of rare earths is a strategic step. In this way, China demonstrates that it can not only respond to economic pressure, but also shape new rules of the game

In addition, these actions by the Chinese government were a direct response to the US decision to raise tariffs to 104% on a number of Chinese goods, including electronics, equipment and household appliances. In response, Beijing raised tariffs on American goods, which became a domino effect for the markets.

Nervousness in global marketsUS stock markets immediately reacted to the economic confrontation between the US and China and showed negative dynamics: the S&P 500 and Nasdaq indices fell by 2-3.5%. Large investors reacted by selling off assets and moving to more “defensive” strategies.

The fintech expert noted that the cryptocurrency market also reacted to the risks, showing significant volatility. Even gold, which is a classic “safe haven”, temporarily fell in price as market players focused on preserving liquidity.

Investors are not just hedging now – they are completely rebuilding their portfolios. Geoeconomic tensions are changing the logic of market expectations

Who winsAgainst the background of economic confrontation and reduced exports of rare earth metals from China, a significant increase in interest is expected in producers of these metals from other countries: Australia, Canada, Vietnam and Brazil, – said the fintech expert. The shares of companies in these countries will show growth, and investments in expanding their infrastructure will accelerate significantly, and export margins will increase.

Demand will shift towards diversification of supply sources. This is a chance for countries that were previously in China’s shadow, which monopolized the rare earth metals market

Between two firesDue to the confrontation between the US and China, the European Union finds itself in a rather difficult situation. On the one hand, Brussels plans to maintain a strategic partnership with the United States. On the other hand, Europeans do not want to be drawn into a full-scale trade war.

The US has imposed tariffs on European steel and aluminum, in response, the European Union introduced mirror 25% tariffs on American textiles, agricultural products and metals. The Europeans initially even included bourbon on the list, but after threats from US President Donald Trump to impose a 200% duty on French champagne and Italian wine, the EU excluded American alcohol from its list, thus avoiding even greater escalation. In addition, the Europeans gave a clear signal that they are ready to suspend the tariffs if a fair and balanced agreement is reached.

So, despite the introduction of these measures, the European Union continues to adhere to a restrained strategy, striving to avoid a full-scale trade war and leaving room for negotiations with the United States

According to her, while big players are trying to find a balance, developing countries will suffer. They face risks of rapid inflation due to rising import prices; slowing down infrastructure projects, such as energy projects; rising prices for high-tech equipment. In addition, their financial vulnerability is growing against the background of unstable exchange rates and reduced foreign investment.

Now we see that the world is at a point where raw materials have become a geopolitical tool – markets are in turmoil, investors are rebuilding their strategies, and governments are trying to react to a reality that changes literally every day. Therefore, the confrontation between the US and China is not just another conflict between two states, but a structural shift that could change the economic logic of the 21st century

Let’s addCurrently, Ukraine and the United States are working on an agreement on rare earth metals. In October last year, Ukrainian President Volodymyr Zelenskyy announced that he had proposed to European and American partners to sign agreements on joint protection and investment in critical minerals, which are estimated at trillions of dollars.

This proposal interested the new American administration. Donald Trump met with Zelenskyy after taking office as US President to discuss the details of the agreement. The parties are still working on the text of the agreement. continues. The US is using the rare earth metals agreement as a key argument to continue supporting Ukraine in the war with Russia.