Rare Earths and Aircraft Parts: Export Controls Become Bargaining Chips
Some Chinese rare earth suppliers have begun declining to ship materials to US buyers despite the fact that their export licenses were approved, according to reports from Reuters on September 4, 2026. This selective refusal, which has been observed since early August, is attributed to concerns within the supplier community regarding potential retaliation from Beijing. This development follows China's early-August sanctions against the Responsible Business Alliance, a US-based supply-chain monitor. Reuters reports that these refusals appear to be selective rather than a blanket ban, as several US companies continue to receive shipments after long waits.
The selective restriction of rare earth exports
The current disruption in rare earth flows is characterized by a notable drop in specific materials. For instance, Chinese yttrium exports to the United States have fallen to approximately half of the levels recorded in 2024. This contraction occurs in a highly sensitive geopolitical environment: the issues were reportedly on the agenda ahead of the planned September 24 visit by Xi Jinping to Washington.
One reading of these selective refusals is that they represent a decentralized form of economic pressure. Rather than a formal state-mandated embargo, which would be a clear escalatory signal, the current friction may stem from the private sector's attempt to align with potential state priorities. By declining shipments even when licensed, suppliers may be attempting to insulate themselves from future regulatory or political repercussions in China. This creates a "gray zone" where the official legality of a trade does not match the practical reality of its execution.
The refusals are selective rather than a blanket ban, and Reuters attributes them to suppliers' fear of retaliation by Beijing. Whether they are coordinated is not established.
Why It Matters
Aviation components as diplomatic leverage
Simultaneously, the United States has begun utilizing its own control over aerospace technology as a tool in trade negotiations. Sources cited by Reuters on October 1, 2026, indicate that the Trump administration is using China's reliance on US aviation suppliers as leverage. Recent actions by the Commerce Department include slowing export licensing for airplane parts bound for China. These measures are reportedly designed to prevent state-owned entities, such as Comac, from building up large stockpiles of critical components.
The implications for China's domestic aerospace ambitions are immediate. The C919 jet, China's primary narrow-body aircraft, is facing further delivery delays due to what analysts describe as the "US export chill," according to reports from SCMP. This pressure is particularly acute regarding Boeing aircraft; while China sought several years of spare parts to support 200 aircraft it agreed to purchase in early 2026, the US has been reluctant to provide guarantees.
The scope of these potential restrictions is expanding. US officials are reportedly weighing rules that would make it easier to restrict the export of landing gear and other essential aircraft parts. Also, a draft rule is under consideration that would require a new licensing process for aviation hydraulic fluid from major suppliers, including ExxonMobil. This would move the lever from large structural components to essential consumables, increasing the precision with which the US can apply pressure.
| Resource Category | Primary Control Actor | Primary Impact Target | Reported Status |
|---|---|---|---|
| Rare Earth Elements | China | US high-tech manufacturers | Selective shipment refusals since August 2026 |
| Aviation Spare Parts | United States | China's state-owned Comac | Slowed licensing to prevent stockpiling |
| Hydraulic Fluids | United States | China's aviation sector | Proposed mandatory licensing for suppliers like ExxonMobil |
The emergence of mutual chokepoints
The current situation suggests a shift in the nature of US-China competition: a transition from broad-based tariffs to a sophisticated "chokepoint" strategy. In this model, each nation targets a specific, high-value sector where the other side possesses an acute vulnerability. For China, the lever is the upstream control of rare earths necessary for high-tech and green energy transitions. For the United States, the lever is the mid-to-downstream control of aerospace components and specialized fluids required for commercial and state-owned aviation programs.
This strategy creates a high-stakes environment where economic decisions are inseparable from diplomatic maneuvers. The "chokepoint" approach is more surgical than previous trade wars. It avoids the blunt force of general tariffs, which can cause widespread inflation, and instead targets specific nodes in a high-tech supply chain. While this provides more granular control for policymakers, it also creates significant unpredictability for the private companies caught in the middle.
The timing of the trade truce
The strategic importance of these controls is heightened by the current diplomatic window. The September 24-25 summit between President Trump and President Xi resulted in a decision to extend the existing trade truce for two months. This extension creates a temporary period of relative stability, but it also functions as a countdown. The expiry of this truce provides a window for both sides to test the strength of the other's chokepoints before the next phase of negotiations.
One can analyze this as a period of "calibrated friction." Both sides may be using the current months to refine their lists of restricted items and to assess the impact of existing controls on their respective domestic industries. For example, the US may be observing how much delay the C919 can sustain before it impacts Chinese economic goals, while China may be testing how much disruption to yttrium supplies can occur without triggering a complete US response against their own critical sectors.
Scenarios for industrial supply chain volatility
The current trajectory leads to several plausible, though distinct, scenarios for the next six to twelve months.
Scenario A: Escalation. In this scenario, the US implements the proposed rules on hydraulic fluids and landing gear. China responds by formalizing its "selective refusals" into a state-directed export quota system for rare earths. This would lead to a significant increase in the cost of high-tech manufacturing in the US and further delays in the Chinese aerospace sector, potentially forcing both nations into more permanent, segregated supply chains.
Scenario B: Stabilized Friction. In this scenario, both sides realize the limits of their respective chokepoints. The US maintains the "slowed" licensing as a permanent monitoring tool but avoids new rules on fluids. China continues to allow shipments to most US buyers but maintains the "gray zone" refusals for sensitive components. This results in a "new normal" of higher compliance costs and longer lead times for aerospace and high-tech firms, but without the total disruption of a full trade war.
Strategic indicators for decision makers
For executives, investors, and policymakers, several specific indicators will determine which scenario is unfolding. Monitoring these factors will be critical for risk management in the aerospace and high-tech sectors.
- Regulatory milestones: The official announcement of a licensing requirement for aviation hydraulic fluids or landing gear in the United States. Reuters
- Commodity flow data: Monthly export volumes of yttrium and other rare earth elements from China to the United States, compared against 2024 levels.
- Aerospace delivery timelines: Changes in the projected delivery schedules for the Comac C919, which would serve as a direct indicator of the effectiveness of US component controls. SCMP
- Diplomatic deadlines: The expiration of the current two-month trade truce extension.
Sources: engineeringnews.co.za, miningweekly.com, ajot.com, scmp.com.