1. why Rare Earths Now: Weaponizing High-Tech Industries in the US-China Conflict

the dormant US-China trade conflictis once again roiling the world. on November 9, China announced that it was significantly tightening export controls on rare earths, a key resource for high-tech industries, and the United States immediately responded by threatening to impose 100% additional tariffs on China. The retaliatory measures, which will take effect on November 1, suggest that the trade war has moved beyond simple tariff friction and into a new phase of resource weaponization.

at the center of this conflict are rare earths. rare earths are a group of 15 elements with the periodic symbols 57 through 71, plus scandium and yttrium. these minerals have been called the "vitamins of high-tech industry" because they are essential to the production of high-tech products such as electric car motors, lithium-ion batteries, semiconductor supply chains, and military electronics.

the problem is that China dominates this rare earth market. china holds 44 million tons of the world's rare earth reserves, controls about 70% of global production, and more than 90% of the processing capacity to separate and refine mined ores into usable products. this monopoly position has made rare earths a strategic weakness, or "Achilles heel," to which the US is most sensitive.

in fact, even at the height of the US-China trade conflict last April, China temporarily deflected a US tariff attack by pulling the rare earths export suspension card. At the time, the Trump administration hastily offered talks, which eventually resulted in a truce of sorts that put further tariff increases on hold until November. in doing so, China proved once again that resource control is not just a warning, but a real bargaining chip.

2. dissecting China's 'super control': The promulgation of the 0.1% rule

china's control of rare earth exportsbegan in earnest in 2020 with the implementation of the Export Administration Law, and has since steadily expanded the scope of its controls. in December 2023, it added rare earth smelting and processing technology itself to the export ban list, and in April 2025, it tightened restrictions by introducing a "license system" for the export of seven heavy rare earth raw materials and magnets, including samarium, gadolinium, and turbium.

today's announcement further strengthens these regulations by adding five more rare earths to the list of those subject to export licenses, bringing the total to 12, starting in November. we also restricted the use of rare earths for military purposes, stating that the purpose of the controls is to protect national security and advanced technology.

0.making 1% offshore control a reality: tectonic shifts in global supply chains

the key and most impactful part of the move is the realization of the "0.1% offshore control" rule.

according to a notice from China's Ministry of Commerce, if a product produced overseas contains more than 0.1% Chinese rare earth materials or related technologies, it will require an individual export license from the Chinese government to be exported to a third country. this measure forces overseas manufacturers to be extremely transparent about the source of every component and technology used in their semiconductor supply chain or lithium-ion battery manufacturing process.

these "regulatory wall" measures are an attempt to bring manufacturing companies from around the world into China's regulatory net. controlling even products produced overseas can be interpreted as a strategic move to undermine U.S. industrial competitiveness by shaking up the global supply chain itself in the face of public sanctions.

beyond rare earths to artificial diamonds

not content with rare earths, China has also signaled additional item controls directly targeting U.S. high-tech hegemony: starting November 8, it will implement export controls on advanced lithium-ion batteries and artificial diamond products.

of particular interest are artificial diamonds, which are used as an essential material in the manufacture of high-power, high-frequency semiconductors that push the performance limits of silicon-based semiconductors thanks to their high thermal conductivity and wide bandgap properties.this is a strategic resource that directly impacts high-performance chips, such as the cutting-edge Nvidia stock used in U.S. artificial intelligence (AI) research and development. by controlling these items, China is clearly demonstrating its intent to tighten its grip on the U.S. supply chain for AI and computer chip manufacturing.

Table 1. Changes and impacts of China's key resource export controls (as of 2025)

items Under Controlwhen Implementedkey Controlskey Impacted Industries rare earth commodities (12 expanded) november 2025 individual license system, military use restrictions semiconductors, electric vehicle motors, military equipment overseas products containing 0.1% rare earths december 2025 export license required if containing more than 0.1% Chinese materials/technology (offshore control) korean/US/Japanese advanced component manufacturers advanced lithium-ion batteries/materials november 8, 2025 restrictions on export of battery cells and core anode/cathode materials electric vehicles, ESS (energy storage systems) synthetic diamonds november 8, 2025 implementation of controls on high-frequency/high-power semiconductor manufacturing high-performance semiconductor manufacturing and AI research

3. financial market shock: How KRW 1100 trillion disappeared in a single day

the reignited U.S.-China trade conflictsent shockwaves through global financial marketsaround the world. Investors perceived this as more than just trade friction - it was a structural threat that was shaking the foundations of the global high-tech industry.

in the immediate aftermath of China's announcement of tighter controls on rare earths, the New York stock market fellsharply, with all three major indices posting declines of between 2-3%.the tech-heavy Nasdaq Composite was hit the hardest, plunging 3.6%.

the shock quickly led to market capitalization evaporating for major big tech companies. the market capitalization of key tech stocks like Nvidia, Tesla, Apple, and others was wiped out by over KRW 1,100 trillionin just one day.the plunge in share prices, especially for companies directly connected to the AI chip supply chain, such as Nvidia, shows that investors have decided that the control of rare earths and synthetic diamonds will put a direct brake on the future growth of the tech industry.

the peak in risk aversion has also been accompanied by a crash in volatile cryptocurrencies, with Bitcoin falling 15% and Ethereum plunging more than 20% over the past weekend, demonstrating once again the market's preference for safe-haven assets in times of global uncertainty. Bitcoin was once trading around $126,000, but has since fallen as low as $110,000, indicating a significant downturn in market sentiment.

Table 2. Changes in key indicators in global financial markets (after China's export control announcement)

market/Stockkey percentage change (post-announcement)market capitalization evaporation (Big Tech)reflecting investor sentiment nasdaq Composite 3.6% decline not applicable reflects concentration of risk in tech stocks and AI supply chain new York Stock Exchange (3 major indices) 2% to 3% down not applicable increased overall economic uncertainty nvidia, Tesla, Apple, etc N/A over KRW 1,100 trillion evaporated direct reflection of China market and supply chain risk virtual Assets (Bitcoin, Ethereum) 15% to 20% crash n/A expanding global risk aversion

4. K-Industry Survival Strategies: Beyond the 'Sandwich'

related articles: Advanced semiconductor supply chain reorganization and opportunities for K companies

4.1. Samsung Electronics, SK Hynix: The 0.1% Rule and Semiconductor Supply Chain Reorganization

south Korea has an important position in the high-tech industry, especially in the semiconductor supply chain, which is at the center of the U.S.-China conflict, but it is also one of the most likely to bear the brunt of China's 0.1% offshore control rule. south Korean companies like Samsung Electronics and SK Hynix Semiconductor are exposed to risks such as regulatory approval delays because it is difficult to completely eliminate Chinese rare earth materials or technologies from their production processes.

even if Samsung Electronicswere to move forward with 2-nanometer (nm) mass production in the U.S., it would still need to obtain approval from the Chinese government if even trace amounts (0.1% or more) of Chinese rare earths or related technologies are included in the manufacturing process. this is a serious risk that adds uncertainty to production schedules and could derail the 'super cycle'.

furthermore, South Korea's dependence on China is overwhelming for key materials for high-tech industries, including niobium (78%) and silicon (63%), which are essential raw materials for semiconductors, as well as gallium (98%), graphite (97%), and indium (93%).this structural dependence amplifies the "sandwich risk" that South Korea faces from the dual pressures of U.S. sanctions and Chinese resource control.

as a result, South Korean companies should prioritize sourcing diversification and resource security as they strengthen their indigenous technological capabilities and keep pace with the rush to 18 reshape their supply chains, including the U.S. signing a key minerals agreement with Australia.

4.2. The K-battery dilemma: Raw material dependence and counterproductive expectations

china's export control measures on lithium-ion batteries are likely to have a major impact on the three domestic battery makers (LG Energy Solutions, Samsung SDI, and SK Energy). as they are highly dependent on China for key battery materials such as lithium (65%) and graphite (97%), the Chinese restrictions could lead to higher raw material prices and delivery instability.

however, the crisis could paradoxically create a structural opportunity for the Korean battery industry. as Chinese-made lithium-ion batteries currently account for 65% of U.S. imports, if China's export control measures or additional U.S. sanctions materialize and Chinese batteries are forced out of the U.S. market or become more heavily regulated, Korean battery companies with local production bases could benefitgreatly.the more the U.S.-China conflict escalates, the faster the pace of global supply chain reorganization will accelerate, providing K-battery companies with a decisive opportunity to expand their U.S. market share.

related article: the Future of the Lithium-Ion Battery Industry: The Role of IRAs and K-Batteries

5. FAQ: What investors need to know in the era of protracted US-China conflict

Q1. Will rare earth export controls eventually be eased?

A. The current U.S.-China conflict has evolved beyond a simple trade dispute into a structural battle for high-tech supremacy.19 China has been legislating and institutionalizing rare earth controls in the name of national security and industrial competitiveness,4 and the U.S. has been building alternative supply chains in response to China's actions, including signing key mineral agreements with Australia and others.18 With both sides preparing for the long haul, it is unlikely that controls will be relaxed in the short term, making resource security responses essential.

Q2. Why are synthetic diamonds important for semiconductor manufacturing?

A. Man-made diamonds, especially synthetic diamonds, are essential for high-performance semiconductors (power electronics, high-frequency devices) that operate in high-temperature, high-voltage, and high-frequency environments that silicon cannot withstand.10 Their superior thermal conductivity (more than five times that of silicon) makes them ideal as a heat dissipation material to control heat generation in high-performance AI chips.10 China controls exports of items for research and development of logic chips below 14 nm or for AI research and development with potential military applications.

Q3. How does China's 0.1% rule work in practice?

A. Overseas manufactured products containing more than 0.1% Chinese rare earth raw materials or related technologies must obtain a dual-use item export license from China's Ministry of Commerce.6 This requires foreign companies to be extremely transparent about the source of raw materials and technology used in their products, with sanctions for non-compliance, creating significant supply chain uncertainty for global manufacturers.

Q4. Can Korea become self-reliant in rare earths?

A. Rare earth independence cannot be achieved through simple stockpiling. The key to the rare earth industry is the technology to separate, refine, and process the ore after mining23, and South Korea has struggled to localize this key technology. in order to secure resource security, the ultimate goal should be to independently build the front-to-back value chain of the rare earth industry, from exploration to development, mining, processing, finished products, and recycling.

Q5. Are there any companies other than Nvidia stock that we should keep an eye on after this?

A. If the U.S.-China trade conflict escalates, companies that invest in building alternative supply chains for rare earths, or those that succeed in diversifying their raw material imports for lithium-ion batteries, may benefit in the long run. There is also growing interest in alternative investment products such as rare earth-related exchange traded funds (ETFs), but they should be approached with caution, as stock prices have plummeted in the past when China relaxed export restrictions.

6. conclusion: In an era of resource weaponization, it's time to hurry up and restructure your supply chain

the U.S.-China trade conflict is now more than just a tariff war; it has escalated into a "resource supremacy war" with the survival of high-tech industries at stake. china's 0.1% offshore controls, which extend beyond rare earths to include lithium-ion batteries and synthetic diamonds in its export control list, especially those produced overseas, are forcing structural changes in semiconductor supply chains andmanufacturing around the world. The financial market shockthat wiped out KRW 110 trillionin big tech market capitalization, including Nvidia's stock price, in a single day was a testament to the stakes.

south Korea's high-tech companies, such asSamsung Electronics and SK Hynix, need to break out of the "sandwich" by reducing their dependence on China and securing their own technology and resource value chains. while there are opportunities for K-batteriesto reap reverse profits from the crisis, it is time to hasten efforts to become fundamentally self-reliant in key raw materials.

related article: The long-term outlook for the U.S.-China tech supremacy race and South Korea's independent capabilities

how are you reacting to this rare earth shock and global supply chain reorganization? share your insights in the comments below. for more in-depth global economic analysis, subscribe to keep up with the latest news.