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Supply Chains Become Key Battleground in U.S.-China Trade War as Export Controls Escalate

by Team Lumida
June 12, 2025
in Macro
Reading Time: 4 mins read
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Key Takeaways:

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  • The U.S. and China are increasingly using export controls as economic weapons, targeting critical sectors like semiconductors and rare earths, disrupting global supply chains.
  • China dominates manufacturing and rare-earth exports, while the U.S. leverages its technological edge, creating vulnerabilities for both economies.
  • Companies are being forced to split supply chains to navigate trade conflicts, treating the U.S. and China as separate markets.
  • A recent trade truce framework includes China resuming rare-earth exports to the U.S. for six months, but tensions remain high, with both sides retaining leverage.

What Happened?

The U.S.-China trade war has entered a new phase, with export controls becoming the primary tools of economic statecraft. Both nations are leveraging their dominance in critical sectors to gain an edge. The U.S. has restricted exports of advanced semiconductors, chip-making tools, and jet engine parts to China, while China has tightened controls on rare-earth minerals and magnets essential for industries like automotive, defense, and electronics.

Recent trade talks in London resulted in a framework to restore a May truce, with China agreeing to resume rare-earth exports to the U.S. for six months. However, the temporary nature of the agreement highlights the fragility of the truce and the potential for future disruptions.


Why It Matters?

The weaponization of supply chains marks a significant shift in the global trade landscape, with far-reaching implications for businesses and economies worldwide. Export controls are creating new uncertainties for companies, forcing them to rethink supply chain strategies and build resilience against potential disruptions.

China’s dominance in manufacturing and rare-earth exports gives it significant leverage, while the U.S.’s technological superiority allows it to counter with restrictions on high-tech goods. This dynamic is reshaping global trade, with companies increasingly treating the U.S. and China as separate markets to mitigate risks.

The use of export controls also mirrors Cold War-era arms-control strategies, where both sides sought to limit escalation while retaining leverage. However, the economic stakes are higher, with supply chain disruptions affecting industries from automotive to semiconductors.


What’s Next?

The temporary six-month rare-earth export licenses granted by China signal that Beijing could reimpose restrictions if trade tensions escalate. Companies operating in both markets will need to continue diversifying supply chains and building redundancies to navigate the evolving trade environment.

The U.S. and China are likely to continue using export controls as bargaining tools in future negotiations, adding complexity to global trade. Businesses and policymakers will need to monitor developments closely, as any escalation could have widespread economic consequences.

Meanwhile, third countries like Japan and the EU may play a critical role in mitigating supply chain risks by offering alternative sources for critical materials and technologies.

Source
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018