America Still Has the Upper Hand Over China

Foreign Affairs | Ben A. Vagle and Stephen G. Brooks

The United States faces a critical strategic choice as China leverages its control over 70 percent of rare-earth mining and 90 percent of processing capacity to pressure Washington. Although Beijing blacklisted key U.S. firms in June 2026, Washington retains superior long-term leverage through its dominance in high-tech sectors, where U.S.

and allied firms generate 84 percent of global profits. This structural imbalance stems from Beijing's deep reliance on $2 trillion in imported intermediate goods, primarily sourced from American allies, alongside its export-dependent growth model. Unilateral trade measures by the Trump administration yield limited results, but a joint allied cutoff would inflict economic damage on Beijing five to 11 times as large as that on the American economy. Initiatives like the Pax Silica coalition, established in December 2025, demonstrate the potential of joint allied investments to secure AI supply chains, protect critical infrastructure, and neutralize Chinese mercantilism.

Comment

The establishment of the Pax Silica coalition in December 2025 demonstrates how multilateral supply chain frameworks are replacing traditional bilateral security pacts as primary instruments of economic deterrence. By coordinating rare-earth stockpiles and technology transfer standards among partners like Australia and Japan, Washington is attempting to institutionalise collective economic defence. This shift reveals that Washington's alliance cohesion is increasingly measured by semiconductor and rare-earth integration rather than joint naval manoeuvres in the South China Sea. Consequently, the durability of Pax Silica will depend on resolving transatlantic tariff disputes that threaten to undermine collective leverage against Beijing.

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