Behind China's Restrictions on Rare Earths: A New Round of Great Power Game in the Cold War Pattern

Introduction

Author: @0xBenniee

On the evening of October 11, a tweet from Trump caused both the crypto market and the US stock market to panic simultaneously. The contract market experienced an unprecedented chain liquidation within just a few hours, with a total scale reaching 19.2 billion dollars, setting a new historical record.

Why is Trump so eager at this moment? Why is he reigniting a new round of trade conflict?

To understand this, we must go back to the history of the United States over the past thirty years and see how it has "rebooted the system" time and again in times of crisis.

This article will analyze how the United States has relied on external wars, financial expansion, and industrial transfer to resolve internal crises through four cycles of economy and war, and based on this, propose three possible directions that may emerge in the future.

"Financial Assets and Crisis Indicators"

Let's first look at a comparison between two key assets and gold:

Copper/Gold (representing electricity and industrial activity) and Oil/Gold (representing energy and inflation expectations).

The shaded areas marked in the image correspond to the four major economic crises that the United States has experienced over the past thirty years.

(Data source: MacroMicro.me)

From the two charts, it is not difficult to see that both ratios have reached turning points again within the historical range. Although it is still unclear whether this indicates the onset of a new round of systemic crisis, this signal is sufficient to indicate that the global financial cycle is entering a new critical point.

"How the United States Responded to Solve Four Major Historical Nodes"

1. The Gulf War of 1990 saw the U.S. economy facing serious recession and inflationary pressures. The U.S. government successfully shifted domestic economic conflicts through the Gulf War, stabilizing social confidence while taking the opportunity to control Middle Eastern oil supplies, stabilizing energy prices, and further consolidating the petrodollar system and the dollar's hegemonic position globally.
2. In 2001, China joined the World Trade Organization (WTO). At that time, the United States was lacking larger overseas markets and hoped to digest excess capacity through globalization, outsourcing manufacturing overseas. China's accession opened new channels for American capital for export and investment, providing a complete manufacturing system for the global supply chain. Through globalization, the United States transferred internal manufacturing pressure outward, while China rapidly became the "world's factory" in this process, forming a deeply intertwined economic cycle between China and the United States.
3. The 2008 subprime mortgage crisis, excessive leverage by residents triggered the financial system, and the bankruptcy of Lehman Brothers became the fuse. The United States restarted the economy through low interest rates and quantitative easing fiscal stimulus, but more liquidity was released into the global market. Meanwhile, China launched the "4 trillion" plan after the crisis, increasing fiscal spending and prioritizing investment, which initiated a new round of growth cycle through large-scale infrastructure construction. As a result, China became a "infrastructure madman" and gradually transformed residential leverage into fiscal leverage at the national and local levels, taking on the responsibility of driving global growth.
4. The COVID-19 pandemic in 2020 caused the US economy to come to a complete standstill, leading the Federal Reserve to initiate unprecedented quantitative easing. National leverage rapidly increased, and total debt surpassed historical highs. The bankruptcy of Silicon Valley Bank exposed systemic risks, but Powell temporarily resolved the crisis through extreme easing and liquidity injections. In the short term, the US completed its economic restart at the cost of inflation and debt, and once again shifted the crisis globally through excessive money supply.

"Learning from history, what does Trump want to do now"

Today, what Trump seeks is not just an economic recovery, but a new industrial revolution centered around technology.

In the current context of high debt, high inflation, offshoring of manufacturing, and heavy fiscal pressure, the United States urgently needs a new narrative to reshape confidence and capital flows.

The "Technological Spiral to the Sky" is precisely the answer he is trying to create, and it is also a card he must play to Make America Great Again.

"The Sino-U.S. Game Between War and Debt"

In the face of a crisis, the traditional solution of the United States remains unchanged — first prioritize shifting contradictions externally, and only seek internal reconciliation if external shifting is not possible.

Historically, the United States is one of the few countries in the world that has "enriched" itself through war. Whether during World War I or World War II, the U.S. achieved primitive accumulation of wealth amidst the wars of other countries, completing economic rebalancing through production expansion and dollar outflow brought about by war.

This logic continues to this day—when there is internal strife, high inflation, and overwhelming debt, the United States will seek an "external outlet" to reshape the global order through war, trade wars, or technological revolutions.

China's approach is exactly the opposite. China's response resembles a structural adjustment that pulls the rug out from under—when external pressures rise, China does not choose to shift the crisis, but instead stabilizes the system through fiscal expansion, industrial upgrades, and internal deleveraging.

Behind the trade war, it is essentially a game of income distribution and economic pressure. The leverage at the household level is nearing its limit, but there is still room for leverage at the national level.

In contrast, the fiscal space in the United States is nearly exhausted, with the debt ceiling long exceeding 100% of GDP. Frequent disputes between the two parties over increasing debt have led to government shutdowns, and any further borrowing will incur political costs for the next administration.

Today, the United States urgently needs a new narrative to bring dollars back and rebuild trust. Foreign wars and technological revolutions have become the most direct means.

The core of the technological revolution is energy and raw materials. The key material that supports all of this—rare earths—is in the hands of China.

In October 2025, China expanded restrictions on more rare earth elements and related processing equipment and technologies, adding several rare earth elements (such as holmium, erbium, thulium, europium, ytterbium, etc.) to the restricted list, and set more licensing requirements for the export of rare earth magnets, recycling, processing equipment, and technologies. This means that almost all upstream high-performance magnetic materials and key military components will require approval from China for export.

It was the enactment of this bill that made Trump furious. In a late-night tweet, he lashed out at China for "weaponizing resources," calling it a "direct threat to the U.S. technology system."

China's control over the rare earth industry chain is equivalent to planting a "supply chain landmine" at the bottom of the U.S. technology and military industrial system. This time, the U.S. wants to initiate a localized war, while China has chosen to cut off the source.

China's national leverage still has room for growth. In contrast, the ratio of U.S. federal debt to GDP has already exceeded or is close to 124%. Once China no longer stubbornly defends the exchange rate, there is still significant room for the RMB's borrowing limit to be released.

In other words, the United States is borrowing money from the future, while China is borrowing time from the structure.

"The Future Path: Three Open-Ended Outcomes"

1. America wins, technology revitalizes the nation, and the dollar is prolonged.

Trump is betting on technology. If the United States can completely restructure its industrial chain in fields such as AI, semiconductors, aerospace, and military industry, and achieve a domestic circulation of high-end manufacturing, then this technological revolution will not only be an economic recovery but also a "reconstruction of the dollar system."

Technological breakthroughs will attract global capital back to the United States, driving a new round of asset inflation and industrial dividends. The US dollar will once again become the anchor for global growth, and the technology sector of the US stock market will redefine the valuation ceiling.

This will be a victory of innovation over war, and it is also the last "peace card" that the United States can play to maintain its hegemony.

2. The failure of the United States, the collapse of the dollar's credit, the rebirth of gold.

If the technological revolution fails, and US debt continues to expand while fiscal revenue stagnates, then "dollar credit" will become the biggest bubble.

Once the debt crisis spreads, U.S. Treasuries will no longer be regarded as risk-free assets, and international capital will quickly seek alternative value anchors.

Gold, silver, rare metals, and assets with intrinsic value storage functions will become the new core of safe-haven investments.

The collapse of the dollar system will not cause the world to collapse, but it will bring "credit" back to real metals and resources. At that time, whether the narrative of Bitcoin as digital gold can still hold — only time will tell.

3. The Rise of China and the Revaluation of World Financial Assets

China has not chosen war, nor has it chosen inflation, but rather has chosen "time."

When national leverage replaces household leverage, fiscal tools and industrial policies gradually take over the growth momentum, the borrowing space of the renminbi and structural adjustments will unleash new financial imagination.

If China can stabilize its exchange rate, relax capital flows, promote capital market reforms, and increase state-owned enterprise dividends, it will lead to a systematic asset revaluation.

The core assets of the financial market - high dividends, resources, and technology manufacturing chains - will be repriced globally.

This is another kind of victory, not relying on war, nor on printing money, but on the resilience of structure and the compound interest of time.

At that time, it will be another mindless bullish era for the Chinese economy, an era that belongs to us.

"Ending"

The footsteps of the economic cycle have never stopped. The liabilities of the dollar, the rebirth of gold, and the game of the renminbi among major powers are all just the prologue to a new order. History does not simply repeat itself, but humanity always wakes up on the same edge.

This time, we are all standing at the intersection of a new era.

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