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On Thursday, China’s commerce ministry said that starting on Dec. 1 a license will be required for foreign companies to export products with more than 0.1% of rare earths from China or that are made with Chinese production technology.

That prompted President Donald Trump to announce Friday that he will impose an additional 100% tariff on China and limit U.S. exports of software. But while it seemed like the latest tit-for-tat exchange in the U.S.-China trade war, there’s much more at stake.

“We should not miss the fundamental point on rare earths: China has crafted a policy that gives it the power to forbid any country on Earth from participating in the modern economy,” Dean Ball, who served as a senior advisor in the White House Office of Science and Technology Policy earlier this year, wrote on X on Saturday.

“They can do this because they diligently built industrial capacity no one else had the fortitude to build. They were willing to tolerate costs—financial and environmental and otherwise—to do it. Now the rest of the world must do the same.”

China has a stranglehold on rare earths, producing more than 90% of the world’s processed rare earths and rare earth magnets. They are used across industries, from the tech sector to automakers and defense contractors.

They are so critical that U.S. car companies have curbed production due to rare earth shortages as China has leveraged the supply to counter Trump’s tariffs.

While ongoing talks between Washington and Beijing had eased access somewhat, trade tensions were simmering ahead of the latest flare-up on Friday.

For example, the U.S. moved to restrict other countries’ exports of semiconductor-related products to China. And this past week, the U.S. announced port fees on Chinese ships, prompting Beijing to impose a similar fee on U.S. ships docking at Chinese ports. China also launched an antitrust investigation into U.S. chipmaker Qualcomm.

“In other words, the United States can cut China off from the chips of today, but China can make it vastly harder to build the chips and other advanced technologies of tomorrow,” Michael Froman, president of the Council on Foreign Relations and a former U.S. Trade Representative, said in a Substack post on Friday.

Economist Robin Brooks, a senior fellow at the Brookings Institution, observed that markets expect Trump’s new China tariff threat will backfire on the U.S.

But he rejected the idea that China has the upper hand over the U.S., saying in a post on Sunday that its exporters are suffering steep drops in profits due to Trump’s tariffs.

“This means that China may be using rare earths to escalate the stand-off with the US because it has no other choice,” Brooks explained. “The hit to its export sector is just too considerable, making it necessary to raise the stakes in an effort to bring US tariffs down.”

For its part, Beijing remained defiant, with the commerce ministry saying Sunday that China doesn’t want a tariff war but is also not afraid of one. It also said the export controls are not a ban on rare earth shipments but are a sovereign right.

Former White House advisor Ball, who is now a senior fellow at the Foundation for American Innovation, said China’s strict rare earth controls represent an opportunity for the rest of the world to build a new supply chain that can withstand weaponization by any one country.

“Always remember that supply is elastic,” he added. “If our lives depend on it, we can surmount many challenges far faster than the policy planners in Beijing, Brussels, and Washington realize.”