China announced in early October that it would expand restrictions on rare earth mineral exports, spreading a shock wave across the West and provided a stark reminder that China can easily weaponize its rare earth leverage.
While the implementation of these export measures has been suspended for one year following the Trump-Xi meeting in Seoul, this event served as a warning. Whether de-escalated or not, this situation underlined China’s power over global supply chains, prompting responses among the G7 members and the EU.
Across the strait from China lies Taiwan, whose centrality in global supply chains is equally important, as it is a leader in the semiconductor sector and a critical actor in AI development. During his recent National Day speech, President Lai Ching-te (賴清德) emphasized his objective to advance a non-red supply chain, through which Taiwan and like-minded countries could “safeguard the values of freedom and democracy.”
The non-red supply chain remains for now a remote vision, but it could be possible that by weaponizing rare earths, China may have inadvertently offered Taiwan’s strategy the perfect context for gaining traction and international support.
As the trade war intensifies globally, Taiwan’s unique strengths could support its international engagement, cementing its status even more firmly within global supply chains. Taipei should definitely take advantage of the current situation to advance its cause.
China’s rare earth weaponization
China’s control over the rare earth sector offers Beijing the power to respond to Western restrictions on semiconductor exports while underlining its capacity to influence global trade dynamics.
China accounts for 90% of global rare earth magnet production and 85% of the world’s refining and processing capacity for rare earth elements. China’s domination of key minerals poses a great risk to Western countries’ national defense, given their importance in many technological and military systems.
Though exaggerated, this perception of weaponization has tangible effects. It dramatically erodes confidence in China’s reliability as a trade partner and accelerates the diversification of production elsewhere.
Japan, Australia, the US, and the EU have all launched initiatives to reduce supply chain dependence on China. Beijing’s power still matters, but its coercive use increasingly invites pushback rather than compliance.
This situation creates a context in which Taiwan’s strategy can find greater relevance.
Taiwan’s contribution
IOver the past few years several governments have launched initiatives to secure the supply of critical materials. Notably, the US introduced tax incentives for domestic refining under the Inflation Reduction Act, and the EU adopted its Critical Raw Materials Act to reduce single-source dependency.
These measures indicate a shift from cost-efficiency to supply security as the guiding principle of industrial and security policies. More importantly for Taiwan, such initiatives imply a broader attempt to decouple from China, which can favor both its international integration and its non-red supply chain vision.
Taipei seeks to promote the importance of political trust for supply chain resilience. For partners already exploring diversification, Taiwan’s approach and experience with China can offer valuable insights.
Taiwan’s progress toward non-red supply chains is already visible in several areas. First, through the democratic drone supply chain and its collaboration with Washington, Taipei seeks to expand its share in this market by producing drones that do not contain Chinese components.
In Japan, TSMC’s joint venture in Kumamoto has become a flagship example of allied semiconductor cooperation, exporting Taiwan’s manufacturing expertise to enhance Tokyo’s supply chain security. Meanwhile, the relationship between the European Union and Taiwan has steadily grown in the past few years, supported by the common goal of promoting democratic values and securing supply chains.
Moreover, the EU–Taiwan Trade and Investment Dialogue provides an institutional channel to advance supply-chain and semiconductor resilience with European partners, which is complemented by the European Chips Act that fosters collaboration with Taiwan.
Thus, while Beijing’s economic coercion addresses its own strategic priorities and goals, it also provides Taipei with factual examples to advance its message. China’s restrictions unintentionally contribute to consolidating Taiwan’s arguments and enhancing its economic, security, and diplomatic relations globally.
Policy implications
The current truce between Washington and Beijing could collapse at any time and the trade war could quickly resume. Sidelined actors such as the EU should therefore take measures to avoid being caught unprepared.
It is critical to analyze and address the structural vulnerabilities of national supply chains, reduce overdependence, and improve the efficient use of critical minerals while developing alternative materials.
Nonetheless, China’s commercial leverage is not limited to rare earths. Its influence over renewable energy components remains significant, and its semiconductor industry is expanding rapidly.
De-risking and gradual decoupling from the intrinsic risks of overdependence on critical industrial inputs remain essential. While such decoupling cannot be sudden and must be carefully managed, its necessity is increasingly evident.
These efforts will require time and resources but are indispensable to ensuring a more stable global supply chain. In this regard, Washington’s tariffs on its allies hinder diversification by raising costs and extending the time needed to achieve it.
Within this logic, incorporating Taiwan should be evident. This approach also serves Taiwan, as the race toward diversification opens new paths for cooperation and strengthens its international integration. (Taipei should nonetheless be careful to avoid a potential backlash over its dominance in the semiconductor industry.)
Finally, a greater integration of Taiwan into the global economic system could carry significant risks if not supported by substantive Western backing, both defensively and rhetorically, as any disruption would result in outcomes even more severe than those already anticipated.
Fully decoupling from China is unrealistic and unfeasible, but if the non-red supply chains succeed, this could drastically reinforce Taiwan’s resilience by lowering China’s coercive leverage.
