China flexes rare earth leverage. What that could mean for Trump-Xi meet.

China unveiled more expansive export restrictions for its rare earth supply chain on Thursday, just weeks before President Donald Trump and Chinese leader Xi Jinping are expected to meet. It’s a signal China has cards to play and underscores the fragility of any detente between the two geopolitical rivals.

China’s new restrictions would require foreign companies to get approval for selling magnets that contain even minimal amounts of rare earth sourced from China or produced or refined using Chinese technology.

It is unclear how and when it would implement the restrictions, which mirror those the U.S. has taken to limit China’s access to semiconductor-related exports from third countries.

Export restrictions—by the U.S. on advanced technology including semiconductor equipment and by China on critical minerals—have been a major sticking point between the two countries.

China’s restriction on the export of rare earths and critical magnets led to a scramble among auto makers and industrials over the summer until multiple rounds of negotiations between Treasury Secretary Scott Bessent and his counterparts relaxed them.

The litmus tests for continuing negotiations over the summer was proof China was indeed allowing the flow of critical minerals.

“Clearly, this is a step in the other direction. Happening right before the negotiations [between Xi and Trump], it’s a signal that they have economic power and are going to use it," said Everett Eissenstat, a partner at Squire Patton Boggs and former deputy director of the National Economic Council under Trump.

Taking questions from the press during a cabinet meeting, Trump said on Thursday that he had not been briefed on China’s latest move. “We have the ultimate export—and we import from China massive amounts; maybe we have to stop doing that."

The Commerce and Treasury Departments didn’t immediately respond to a request for comment.

Even if the move by China is posturing, analysts say it is noteworthy.

“The move today is institutionalizing and professionalizing the export control system to be able to pull those cards and move swiftly if they need to," said Geoffrey Gertz, senior fellow at the Center for a New American Security. “If there was a complete lockdown and no rare earth exports, it would have a massive ripple—not just on the U.S. but also others."More broadly, within Beijing, there has been a willingness to strike some deal—as long as it is mutually beneficial, said Andy Rothman, head of China-focused research firm Sinology, who recently visited China and had discussions with those inside and advising the government.

“They are going to be happy to do things like close the TikTok deal and buy more soybeans as long as they get something in return—a significant reduction in the tariff level or relaxation of export restrictions like was seen in the first term," Rothman said.

Beijing is also looking for relaxation in U.S. screening of Chinese investments. On this front, the Trump administration has shown a willingness to allow investments, which have been at the core of framework pacts with other trading partners. For China, the investments would be a way to tap a large U.S. commercial market that has been harder for them to access as national security concerns have intensified. It also offers a way to access more advanced technology.“China’s asks are big foundational issues in U.S.-China policy. Significant concessions would mark a big shift in U.S. policy," Gertz said. “We have now put negotiation of export restrictions in the middle of the trade relationship, which we never used to do. Previously, it had been clear national security actions—like chip controls—weren’t up for negotiations. The Trump administration has moved away from that framework."

Strategists note Beijing doesn’t feel like it needs a deal, with less angst about the current level of tariffs and recent AI wins by the likes of DeepSeek easing some of the concerns about tech restrictions.

“If they can get an agreement with the U.S. that serves their strategic interests and buys them stability, that’s fine. But if not, they are ready to walk," said Arthur Kroeber, head of research at Gavekal, in a webinar. “Trump wants an agreement more than the Chinese do so he is more constrained in what he can do in pushing China than they are."

The hope is that the Xi-Trump meeting in South Korea yields some marginal agreements, enough to keep the lines of communication open and paving the way for a bigger deal next year.

Write to Reshma Kapadia at reshma.kapadia@barrons.com