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On October 7, 2025, China tightened its controls on exports of rare earth minerals just two days before the U.S. confirmed to give more money to help Taiwan’s military defense. The timing was likely not a coincidence.

China views Taiwan as its own territory, so U.S. military support is a major red flag for Beijing.

China appears to be using its control over rare earths as a giant lever to pressure the U.S. The message is simple: If you support Taiwan, we're going to weaken your defense and tech position by pulling rare earths.
 

The Hidden Danger: Taiwan’s Chips

The most important part of this whole fight is in Taiwan: computer chips.

Taiwan is home to TSMC (Taiwan Semiconductor Manufacturing Company), the world's leader in making the most advanced computer chips. They make the brains for all modern technology including for Nvidia (NVDA), Tesla (TSLA), Apple, and other tech-titans. To produce their customers chips, TSMC has access to their customers' intellectual property (IP).

The U.S. government, especially under President Trump, is very worried about this. If China were to take over Taiwan, China would also gain control of TSMC and its customers IP. The US tech lead and tech secrets would be compomised. This would be a disaster for the U.S. economy, chip lead and defense.

To protect itself, the U.S. is pushing to build more chip factories on its own soil, including getting TSMC to invest billions in The US.
 

China’s Chess Move: A Tough Choice for the US

China's move forces the U.S. into a nasty choice, a real geopolitical dilemma:

1. Protect the Chips (Defense): The U.S. keeps funding Taiwan's military to protect the island and its TSMC factories. The cost? China will likely go ahead and cut off rare earth supplies, hurting U.S. weapons making and electric vehicle industries. Reports already show U.S. military projects could face delays because of these shortages.

2. Get the Minerals (Trade): The U.S. can back off its Taiwan defense plans to try to get China to loosen its rare earth controls. The cost? This would increase the risk of China taking over Taiwan, which would mean losing control of TSMC's chips and technology—a tech no-no. Stock markets wouldn't like that one.

China controls about 90% of the world's rare earth processing, so this move is their way of saying: "We hold a crucial card." The new controls even try to stop foreign companies from using Chinese-processed materials in their products, as reported by officials.

This whole fight shows that the trade war between the U.S. and China something bigger than just trade. It's a clash over the future of technology and military power.

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