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Chess is one of my favorite games. In fact, as a child it was something that introduced me to developing a strategy and having the patience to think ahead.

If you’ve ever played chess, you’ll know that the queen is the most powerful piece on the board. It’s her ability to move any number of squares in any direction that gives her unmatched control. The queen can shape the flow and outcome of the game.

One of the oldest and most famous openings, the Queen’s Gambit, involves a sacrifice of a pawn early on. That’s not because the pawn is valuable in itself, but in order to gain a strategic advantage later on. It’s trading a short-term loss for long-term dominance.

Rare earth elements hold that same kind of power in today’s geopolitical and technological arena. They’re like the “queen” of modern materials. They are essential to powering everything from electric vehicles and smartphones to missile guidance systems and renewable energy technologies. Whoever controls rare earths controls a key piece of global influence. They can largely determine their own outcomes.

Now, China just made a move signaling it still controls the flow of these materials by tightening and loosening export restrictions selectively to serve long-term strategic goals. It’s a gambit that offers limited concessions while maintaining overall dominance.

Below, we’ll unpack what this means – but first, let’s take a step back to set the framework.

The May 2025 Trade Gambit

As we’ve detailed here with Prinsights, on April 4, China imposed strict export controls on seven key rare earth metals, forcing exporters to get special government licenses. Officially, the move was dubbed one of national security. But really, it was Beijing pushing back against U.S. tariffs. The fallout was quick. Automakers, electronics manufacturers, and defense contractors found themselves immediately facing supply shortages of key critical materials.

On May 12, the U.S. and China reached a tentative 90-day truce to pause tariff escalation and restart trade in critical minerals, including rare earth elements. The deal was meant to steady supply chains, re-engage trade and ease immediate tensions. But that agreement didn’t stop the tension between the two global powers. Not by a long shot.

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The Trump administration responded decisively on May 28. The U.S. Commerce Department blocked exports of certain American-made aviation equipment to COMAC, China’s state-owned commercial aircraft manufacturer. That included CFM International’s LEAP 1-C engine, which the Chinese airplane maker uses to power its C919. U.S. officials blamed China for dragging its feet on rare earth export licenses and holding back shipments to force the U.S. hand.

Selective Easing and the Rising Global Impact

That same day, in another chess move taken across the world, Chinese state media reported that Beijing might ease export curbs, but only for select semiconductor firms in China and Europe. These companies are China’s allies or strategic partners. Notably, U.S. firms were left out. This selective easing highlighted Beijing’s intent to control supply tightly. It also reflected their global power and influence in the rare earth sector.

The next day, on May 30, in his regular press conference, when asked about the U.S. blocking aircraft equipment to COMAC amidst its claims that China’s control of rare earths in the name of national security were over-stretching the concept, Chinese Foreign Ministry spokesperson Lin Jian stated:

China’s export control measures are consistent with universal practices. Such measures are non-discriminatory and not targeted at any particular country. We stand ready to strengthen dialogue and cooperation on export control with relevant countries and regions and are committed to keeping global industrial and supply chains stable.

What the U.S. does overstretches the concept of national security, politicizes and weaponizes trade and tech issues and are malicious attempts to block and suppress China. We firmly oppose that and will resolutely defend our legitimate rights and interests.

China’s Geo-Economic Reasons for Curbing Rare Earths Constraints

China was not just seeking to curb some of its harsher rare earth export rules to its allied trading partners to spite the U.S. There were economic reasons, too.

The rare earth supply crunch has been straining critical industries - especially automakers, that require these processed materials, 90% of which come from China – have been hit hard.

Major global automakers Volkswagen, General Motors, Toyota, and Hyundai expressed concern over risks to their vehicle assembly operations due to delays in receiving critical rare earth components in a May 9^th letter to the White House.

Indian automakers warned their production lines could shut down within weeks as rare earth magnet inventories rapidly depleted. And despite ongoing appeals since April, India remained largely excluded from China’s selective easing of export controls.

That’s a key reason why while China maintains control over rare earth processing and exports, it is selectively loosening restrictions for industries it favors. It is balancing economic pressures with strategic leverage. A classic queen’s gambit move, appearing to back off only to come back stronger.

That’s also why the U.S. must either build a strong, independent and full rare earth supply chain that hardens its industrial and economic environment from this rare earth gambit, or be left behind. This includes everything from mining to processing and from manufacturing to AI data centers – all of which should now take national security and economic imperatives.

For Founders+ readers, we’ve been tracking this shift for months and in our May launch of the Small Cap Distortion Monitor, the first monthly issue identified the one U.S. company we believe is positioned to benefit from the global rare earths chess game above all others in its sector. If you’re not a Founders+ reader with Prinsights yet, upgrade below to join our community and unlock the latest monthly issue now.

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