The escalating China-Japan dispute over rare earths is a textbook case of modern supply-chain weaponization: one that is reshaping regional trade dynamics in Asia and accelerating a broader rethinking of U.S. and allied industrial strategy.
Over the past several years, China has steadily expanded its export-control toolkit in response to U.S. tariff actions and broader efforts to contain Beijing’s technological rise. Rare earth elements (critical inputs for fighter jets, drones, missiles, smartphones, and electric vehicles) have become central to this strategy. These moves build on China’s 2020 Export Control Law, which systematized control over sensitive exports, and the 2024 Dual-Use Items Export Control Ordinance, which further tightened oversight of goods with both civilian and military applications.
As Washington escalated tariffs, Beijing responded in-kind with supply restrictions, rather than mere tariff actions. China initially imposed controls on five rare earth categories and later added samarium and dysprosium, materials essential to high-performance magnets in October, shortly ahead of a high-profile Trump-Xi meeting in Busan. The message was clear: China would retaliate asymmetrically, targeting choke points where its dominance is hardest to replace.
That strategy has now been extended directly to Japan. Earlier this week, Beijing announced tighter export-license reviews and new controls on certain medium- and heavy-rare-earth-related items bound for Japan, citing remarks by the Japanese Prime Minister Sanae Takaichi regarding Tokyo’s potential role in defending Taiwan in the event of a Chinese invasion. The measures go well beyond metals, including more than 800 dual-use items spanning chemicals, electronics, sensors, aerospace technologies, and maritime equipment.
China’s response has not been limited to trade controls. Beijing also suspended seafood imports from Japan, warned Chinese citizens against travel to the country, and instructed domestic airlines to reduce Japan-bound flights through March 2026. In parallel, China launched an anti-dumping investigation into Japanese exports of dichlorosilane, a key input in semiconductor manufacturing, alleging below-market pricing.
This is not without precedent. During earlier territorial disputes in 2010 and 2012, China’s informal blockade of rare earth exports severely disrupted Japan’s manufacturing sector. Today, despite the lessons of that episode and numerous attempts at decoupling from China as the main supplier of rare earths, Tokyo again finds itself exposed. Roughly 70 percent of Japan’s rare earth imports originate from China. While Japan maintains strategic reserves that may soften the initial shock, stockpiles cannot sustain all downstream sectors indefinitely, particularly defense production.
The political backdrop makes de-escalation unlikely. Prime Minister Takaichi has refused to retract her comments on Taiwan, bolstered by strong domestic support. The geographic stakes are unmistakable: Taiwan lies just 62 miles (100 kilometers) from Yonaguni, Japan’s westernmost island. Any conflict across the Taiwan Strait would almost certainly spill into the East China Sea, directly implicating Japanese security.
China insists that civilian uses will remain unaffected, with the Ministry of Commerce stating that the measures are intended to curb militarization and nuclear development. Yet the line between civilian and military supply chains is increasingly blurred. Japan is the world’s second-largest producer of rare-earth magnets, but it remains heavily dependent on China for upstream raw materials. Meanwhile, Japan continues to supply China with advanced manufacturing equipment and semiconductor inputs that Chinese firms still struggle to replicate domestically, creating a fragile but deeply intertwined technological standoff.
Rare earth controls are no longer blunt instruments. They function as precision strikes, calibrated to impose maximum strategic pressure while minimizing immediate blowback. Battery-materials companies are already feeling the strain. China dominates not only graphite supply for EV battery anodes, but also the precursor chemicals needed for cathode production. Substituting these inputs is not fast – or cheap.
The implications extend far beyond Japan. This episode underscores the urgency for supply-chain diversification across the U.S. and its allies. Countries such as Australia, capable of supplying secure raw and intermediate materials, are becoming central to industrial policy planning. Cost efficiency concerns are slowly morphing into national security imperatives.
The China-Japan rare earth standoff is not an isolated dispute, but rather a warning signal: in an era of strategic competition with a survivalist tang, control over materials now rivals control over markets, and those who dominate the choke points will shape the next phase of global trade.
By Maria Pechurina 白玛莎 , Director of International Trade at Peacock Tariff Consulting