Core Insights - Goldman Sachs released a research report addressing the recent concerns in financial markets regarding rare earths and tariffs, asserting that China's dominance in the rare earth sector is unlikely to be challenged in the short term and predicting a low probability of the 100% tariff being implemented after the APEC meeting [1] Group 1: China's Rare Earth Export Control - The recent expansion of China's rare earth export controls is a response to the U.S. broadening its "entity list/military end-user list" definition, which now includes a "50% ownership rule" that significantly increases the compliance burden on Chinese companies' trade partners [2] - The new U.S. regulations are seen as a major expansion of export control laws, particularly impacting Chinese enterprises, as evidenced by the Dutch government's takeover of a Chinese-controlled semiconductor company [2] Group 2: Impact on Other Asian Economies - The impact of China's export controls on other Asian economies is expected to be precise and not generalized, with China indicating it will issue export licenses for civilian uses of rare earths while rejecting military-related applications [3] - If China limits rare earth supplies specifically for U.S. defense equipment, the economic impact on Asian economies will be minimal, as their defense-related exports to the U.S. account for less than 0.1% of GDP [4] Group 3: China's Dominance in the Rare Earth Market - China maintains a strong dominance in the rare earth market, controlling key stages of the supply chain, including mining, refining, and manufacturing of rare earth permanent magnets [5] - The U.S. government has invested in expanding its rare earth production capabilities, but these facilities are not expected to be operational until after 2028, leaving China with significant bargaining power in the short term [5] Group 4: Potential Impact of U.S. Tariffs - An increase in tariffs by 20% is estimated to reduce China's GDP by approximately 0.7 percentage points, with the impact of tariffs being non-linear [6] - The high dependency of U.S. importers on Chinese rare earth supplies means that even with significant price increases, it would be challenging for them to quickly switch suppliers [7] Group 5: Possible Paths to De-escalation - Three potential paths for de-escalation exist, though their feasibility varies: unilateral concessions from China, U.S. concessions in exchange for a pause in Chinese controls, or both parties escalating measures to gain negotiation leverage [8] Group 6: Key Upcoming Dates - Key dates to watch include the APEC meeting from October 31 to November 1, where a meeting between U.S. and Chinese leaders may occur, and the deadline for the implementation of U.S. tariffs on November 1 [9]