China controls the global supply of samarium, a rare earth metal vital for military production, affecting fighter jets and missiles. Recent supply issues have arisen as Western nations try to restock weapon supplies sent to Ukraine and Israel. During U.S.-China trade talks in London, military-related rare earth exports were not discussed. Chinese officials hinted that approvals for exporting military-grade rare earths, like samarium, depend on how the U.S. handles restrictions on AI chip exports to China. China continues to restrict exports of specific rare earth metals used in U.S. weaponry. Although it has created a limited “green channel” for civilian-use exports to selected U.S. companies, military materials remain prohibited. The U.S. is unwilling to lift AI chip restrictions in exchange for access to rare earths. There are also discussions about extending tariffs on Chinese goods, which could complicate any comprehensive agreement. China’s dominance, especially in refining and processing rare earths, poses a strategic challenge for the West. Analysts warn that trade imbalances and critical mineral issues may linger, possibly throughout Trump’s term. These discussions show that Beijing is ready to use rare earths for geopolitical leverage. This article explains that China has full control over samarium, a material used in defense systems like fighter jets and missile guidance. Recently, obtaining this material has become more difficult as the West tries to replenish its defense supplies, given the amount sent to different conflict areas. Talks in London between U.S. and Chinese delegations did not cover rare earths used in military applications. Chinese negotiators indicated that export approvals for these materials would depend on whether the U.S. eases its rules on AI chip exports. China is still holding back on exporting these metals, allowing only limited supplies for civil uses to trusted companies. Military materials remain off-limits. This situation is complicated by China’s control over global refining capacity, making it hard for others to quickly fill the gap. The U.S. refusal to ease chip restrictions means a formal agreement is unlikely soon. American officials are also considering extending tariffs on Chinese goods, adding to market tension and delaying negotiations. Huang notes that this situation reflects how resource policy is being actively used for strategic purposes. Beijing aims to leverage its refining power to exert diplomatic pressure. For traders, this suggests a clear strategy: market movements will likely respond to policy changes rather than just supply metrics. The refining bottleneck indicates that upstream limitations will remain for the next two fiscal periods. Investments tied to industrial metals or aerospace components might show irregular patterns, fluctuating with policy shifts or changes in exports rather than standard demand. This environment favors trades sensitive to geopolitical events across various time horizons instead of short-term technical measures. Unless there’s a change in chip regulations, it seems unlikely that samarium exports will increase enough to affect broader defense supply chains. Zheng’s insights emphasize that decisions are influenced by larger power dynamics rather than specific industry pressures. In this scenario, adjustments should be made to volatility-sensitive instruments rather than taking long positions outright. Exposures tied to downstream manufacturers might face margin pressures or unstable order flows, even in otherwise strong markets. Those involved in metals futures or options will need to prepare for sudden changes. Keep an eye out for signals regarding export licenses or shifts in tariff enforcement, especially around key fiscal policy dates. Timing will likely be more crucial than price levels.

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