China plays hardball with rare earths not because it has the upper hand in the dispute with the US, but because it has to. China's exports to the US have collapsed, a massive hit to its export sector. China is in a position of weakness, not strength. It desperately needs US tariffs to go away...
US tariffs are inflationary for the US and deflationary for China and everyone else. They cause China to divert all the goods it used to export to the US to the rest of the world, which is now getting a flood of deeply discounted stuff. China also imports less as it tries to sell stuff at home...
