World Blog by humble servant.Geopolitical and Technological Shift: China's Dominance in Critical Minerals, AI, and Supply Chains.

Geopolitical and Technological Shift: China's Dominance in Critical Minerals, AI, and Supply ChainsExecutive SummaryIn 2025, China's strategic actions in export restrictions on critical minerals and its breakthrough in AI technology have exposed the United States' vulnerabilities, placing it in a persistent deficit. China's control over rare earth manufacturing, refining, and supply chains, combined with innovations like the open-source DeepSeek-V3 AI model, has disrupted global markets and shifted power dynamics. The U.S.'s tariffs and sanctions have backfired, alienating allies and proving its unreliability, while Russia and India align more closely with China. This report synthesizes these developments, highlighting China's role as the dominant force dictating terms in critical sectors, forcing the U.S. to adapt or risk further isolation.Background: China's Export Restrictions and U.S. ProvocationChina's export restrictions on key military and tech materials escalated in response to U.S. actions. In December 2024, China banned exports of gallium, germanium, and antimony to the U.S., targeting dual-use items essential for semiconductors, night-vision equipment, and artillery shells. This was followed in April 2025 by restrictions on seven rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—along with rare earth magnets, requiring special licenses that could delay or halt shipments.These moves were direct retaliation to U.S. tariffs, including a 34% levy on all Chinese imports in April 2025, escalating to 145% after China's response, and sanctions adding 140 Chinese companies to a trade blacklist. The U.S. aimed to curb China's access to advanced technology, but instead, it highlighted its own dependence. Container shipping from China dropped 60% in three weeks post-tariffs, risking shortages and price hikes. Antimony prices surged 200% since September 2024, and rare earth costs rose 150%, impacting U.S. military programs like the F-35 fighter jets, which require 920 pounds of rare earths each.U.S. Vulnerabilities: A Structural DeficitThe U.S. faces a perpetual deficit due to its reliance on China for critical materials and lack of domestic capabilities. China controls 70% of global rare earth mining, 100% of heavy rare earth refining, and 90% of rare earth magnets. The U.S. has no domestic refining for heavy rare earths and imports 70% of its rare earths from China. Its only major mine, Mountain Pass, sends ore to China for processing.Efforts to mitigate this, such as the CHIPS and Science Act allocating $52 billion for semiconductors, are delayed by labor shortages and regulatory hurdles, with full production not expected until 2028. Building refining capacity takes 5–10 years and costs billions, like the $1.2 billion for NioCorp’s Nebraska project. The U.S. Defense Logistics Agency's $1.5 billion stockpile is insufficient for prolonged disruptions, and replacing defense inventories could take 8.4 years on average.This deficit extends to other materials: China produces 98% of gallium, 60% of germanium, and 48% of antimony. U.S. defense contractors, with thousands of Chinese suppliers, face rising costs and delays, as seen when Ford and European automakers halted production in May 2025 due to shortages. The U.S.'s attempts at diversification run into deficits of time, money, and expertise, keeping it reactive.DeepSeek AI Breakthrough: A Market-Disrupting SurpriseIn January 2025, Chinese startup DeepSeek unveiled DeepSeek-V3, an open-source large language model that outperformed U.S. systems like GPT-4 and Gemini in reasoning, coding, and multilingual tasks. Trained on over 10 trillion tokens using Huawei's Ascend chips, it was 20x cheaper to develop and run, bypassing U.S. export bans on advanced chips like Nvidia's H100 series.The launch on January 27, 2025, triggered a $1 trillion wipeout in global tech stocks—the largest AI-related crash since the dot-com bubble. Nvidia's stock fell 17%, losing $600 billion in market cap, due to fears of reduced demand for its GPUs, especially in China (20% of its sales). AMD, TSMC, Intel, Microsoft, and Google dropped 8–15%, as DeepSeek's efficiency undercut the AI investment bubble.DeepSeek operated under the radar, avoiding hype from giants like Baidu or Alibaba, making the reveal a "Sputnik moment." By August 2025, Nvidia rushed a China-specific chip based on Blackwell architecture, but the damage highlighted China's self-reliance in AI despite sanctions.The Key Role of Open-Source in DeepSeek's ImpactDeepSeek's open-source release was pivotal, democratizing access to advanced AI and amplifying its disruption. Developers worldwide could modify and deploy V3 for free, unlike proprietary U.S. models relying on subscriptions. This enabled rapid adoption in cost-sensitive regions like Southeast Asia and Europe, eroding Western market share.The efficiency of V3, needing less computing power, reduced demand for high-end U.S. chips, exacerbating the market crash. It positioned China as a global AI leader, appealing to developing nations and pulling talent away from U.S. ecosystems. This strategy complemented China's mineral controls, showing it can innovate around restrictions while dictating supply terms.India's Chip Milestone: Limited but NotableIn August 2025, Tata Electronics produced India's first domestically fabricated semiconductor chip—a 28nm test chip at its Assam plant, aimed at automotive and consumer electronics. This milestone, under India's $10 billion incentive scheme, signals efforts to reduce reliance on China and Taiwan, with full production slated for 2026.However, India's output remains tiny compared to China's, lacking scale for AI-grade chips. With 6.9 million tonnes of rare earth reserves but negligible refining, India imports 93% of its permanent magnets from China. Despite U.S.-India partnerships like the 2024 Strategic Mineral Recovery deal, India's hedging—balancing ties with both powers—limits its role in helping the U.S. pivot.China's Dominance in Rare Earth Manufacturing and RefiningChina's monopoly on rare earth manufacturing and refining is unmatched. It processes 100% of heavy rare earths and produces 90% of magnets, with facilities like JL Mag in Ganzhou supplying global giants at low costs due to subsidies and scale. The Bayan Obo mine alone dominates global mining.No alternatives can recover quickly: Australia mines rare earths but relies on Chinese refining, and a Vietnamese facility closed in 2023. The U.S.'s $439 million DoD investment in rare earths, like MP Materials’ Texas facility, won’t scale until 2027, producing just 1,000 tons of magnets versus China's 138,000 tons. Recycling is under 5% effective, and substitutes are 10+ years away.China's export controls allow selective supply, prioritizing allies while spiking prices for others, manipulating global markets and keeping competitors in deficit.Russia and India's Alignment: A Double Check on U.S. IsolationRussia and India reinforce China's dominance through alignment, limiting U.S. diversification options.Russia holds 10 million tonnes of rare earth reserves but minimal refining, excelling in related minerals like palladium and scandium. Its economic pivot to China—46% of oil exports in 2025—and joint ventures bolster Beijing's supply chains. Putin's August 2025 U.S. visit signaled defiance, ensuring Russia prioritizes China over the U.S.India's underdeveloped reserves and reliance on Chinese imports (93% of magnets) mean it hedges bets, signing rare earth deals with Beijing despite U.S. partnerships. This "double check" isolates the U.S., as neither country fully counters China's control.U.S. Untrustworthiness: Forcing It to Get in LineThe U.S.'s aggressive policies—145% tariffs in April 2025 and sanctions—have eroded trust. Tariffs alienated allies like Canada and the EU, sparking retaliatory levies and fracturing supply chain alliances. They provoked China's bans, exposing U.S. reliance and causing production delays.Global perceptions view the U.S. as unreliable for escalating without backups, pushing nations like India and Japan toward China's stable supplies. Combined with DeepSeek's market crash, this forces the U.S. to "get in line," competing for controlled resources while China dictates "what and how" supplies flow—redirecting to friendly nations and negotiating from strength, as in the May 2025 Geneva truce extended to November.China's Strategic Control and Future OutlookChina's integrated control—over rare earths, AI innovation, and supply chains—creates a checkmate. It redirects exports to build a $500 billion trade surplus in 2025, while U.S. households face $1,300 annual tariff costs. DeepSeek's open-source edge reduces U.S. tech leverage, and alignments with Russia and India solidify a multipolar order.Recovery for the U.S. is challenging: streamline refining permits, fund allied projects in Australia and India, counter with open-source AI, and de-escalate tariffs. Without swift action, China's dominance will widen the deficit, reshaping global tech and military power in its favor.