Will China's New Rare Earth Plan Affect the USD?

2025-10-20

China’s latest move to tighten control over its rare earth commodities has sent ripples through global financial markets. It stirred discussions about the potential impact on the US dollar’s dominance.

These rare earth materials, essential for manufacturing electronics and military equipment, are becoming a new strategic tool in global trade and monetary politics.

As Beijing strengthens its grip on the supply of these critical resources, analysts warn that the ripple effect could extend far beyond trade, potentially reaching the very foundation of the global currency system.

China’s Rare Earth Commodities and Global Leverage

China produces more than 90% of the world’s rare earth minerals, which are key ingredients in products ranging from smartphones to electric vehicles and defense technologies.

Recently, the Chinese government introduced export restrictions on several of these materials, citing national interests and strategic economic reasons.

According to financial analyst Luke Gromen, these export controls are more than just an economic maneuver, they represent a potential shift in global power dynamics.

Gromen explained that by limiting the supply of these materials to Western countries, particularly the United States, China is signaling that it holds a stronger position in the trade balance than many Western economists previously believed.

The policy could disrupt the US military-industrial complex, which depends heavily on imported materials from China. This move, Gromen noted, highlights how commodities can be used as leverage in an increasingly multipolar world economy.

The US Response and Rising Tensions

In response to China’s export controls, the US government has reportedly discussed additional tariffs of up to 100% on Chinese imports.

President Donald Trump’s administration and the policymakers have both emphasized the need for the US to diversify its supply chain for critical minerals.

However, experts suggest that such measures may not be enough in the short term. The United States has limited capacity to process or produce rare earth elements domestically. As a result, Washington’s options remain constrained while Beijing holds a strong advantage.

This growing economic friction reflects a broader shift in international relations, one where economic tools are increasingly being used as geopolitical instruments.

The Impact on the US Dollar and Global Markets

The implications of China’s new rare earth commodities policy extend beyond trade. Gromen argues that the move could indirectly weaken the US dollar’s long-standing global dominance.

Historically, the dollar’s strength has been supported by both the US military presence and its central role in global trade. But if key supply chains, such as those involving rare earth materials, become more dependent on China, the dollar’s influence could gradually erode.

The Kobeissi Letter, a financial analysis publication, reported that the USD is already on track for its worst year since 1973, losing over 10% of its value year-to-date and around 40% of its purchasing power since 2000.

If China continues to restrict rare earth exports, the pressure on the US currency could intensify, potentially leading investors to seek alternatives like gold or Bitcoin.

Bitcoin and Gold as Alternatives to Fiat Money

In this shifting landscape, some analysts believe that digital and hard assets may become safer stores of value.

Luke Gromen emphasized that Bitcoin and gold, often referred to as “hard money”, could protect purchasing power as traditional currencies weaken due to inflation and policy-driven debasement.

While the US government is exploring the use of stablecoins and digital dollars to reinforce monetary stability, Gromen views these as temporary solutions. He argues that they do not address the root issue of currency dilution.

Instead, investors might turn to decentralized or finite assets that are less influenced by political or economic manipulation.

What Lies Ahead for the USD

The evolving situation between China and the United States underscores a deeper global transformation. As China asserts greater control over its new earth commodities, the economic balance that has supported the US dollar for decades could begin to shift.

However, the process is unlikely to happen overnight. The US dollar remains deeply integrated into international trade, finance, and debt markets.

Any significant change to its global status will depend on long-term structural adjustments, including how countries adapt to new trade realities and diversify their reserves.

For now, the world watches as two economic superpowers navigate a complex and delicate balance, one shaped not just by policies or politics, but by the minerals buried beneath the Earth’s surface.

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FAQ

What are rare earth commodities?

Rare earth commodities are a group of 17 elements used in manufacturing electronics, renewable energy technologies, and defense systems. They are vital for modern industries.

Why is China important in the rare earth market?

China controls over 90% of global rare earth production and refining capacity, making it the dominant supplier of these materials worldwide.

How could China’s new export policy affect the US dollar?

By restricting exports, China could weaken the US’s manufacturing base and its economic leverage, which may reduce confidence in the US dollar over time.