Finance ministers from the Group of Seven (G7) and allied economies convened in Washington on January 12, 2026, to chart a coordinated strategy to reduce global dependence on China for rare earth elements. Led by U.S. Treasury Secretary Scott Bessent, the meeting included officials from Japan, Britain, France, Germany, Italy, Canada, the United States, Australia, Mexico, South Korea, and India. While officials emphasised “prudent de-risking,” analysts warn the initiative could be perceived by Beijing as an orchestrated effort to isolate China, potentially triggering trade and diplomatic retaliation.
Legal fault lines in the supply chain
China controls between 47 and 87 per cent of global refining and processing of critical minerals, including lithium, cobalt, copper, graphite, and rare earths. Recent Chinese export restrictions on materials destined for Japan’s military illustrate Beijing’s willingness to weaponise its market dominance. By attempting to set price floors and diversify supply, G7 countries risk violating World Trade Organisation rules on non-discrimination and fair trade, exposing participants to potential litigation or sanctions under international trade law. The legal debate now centres on whether diversification strategies constitute legitimate risk management or unlawful coordinated economic coercion.
Strategic policy measures with controversial implications
Japan’s Finance Minister Satsuki Katayama outlined an ambitious agenda: minimum price mechanisms, tax incentives, public financial support, and supply chain standards enforcing labour and human rights compliance. While framed as ethical and strategic, these measures may be perceived by China as extraterritorial regulation of its exports, raising questions about sovereignty, jurisdiction, and the enforceability of unilateral supply chain rules under international law.
The thin line between de-risking and decoupling
U.S. officials emphasised “prudent de-risking” over full decoupling, yet the difference may be largely semantic. China could interpret these measures as the formation of an anti-China bloc, escalating tensions and inviting retaliatory trade measures. Legal scholars caution that even indirect sanctions, if coordinated, may violate existing bilateral and multilateral trade commitments, triggering WTO dispute mechanisms or claims under investment treaties.
EU, India, and emerging legal challenges
Europe, accounting with participating countries for 60 per cent of global critical mineral demand, faces legal and political pressures to move rapidly while avoiding perceptions of collusion against China. German Finance Minister Lars Klingbeil’s push for an EU-level raw materials fund highlights the blending of domestic law, multilateral governance, and strategic competition. India’s participation is also legally sensitive: while it benefits from alternative supply agreements, it may be drawn into disputes if Beijing challenges the legality of cooperative pricing, supply standards, or export quotas.
Geopolitical and security flashpoints
Control over rare earths is now inseparable from national security. However, by treating supply diversification as a geopolitical strategy, G7 nations risk transforming a resource management initiative into a flashpoint for conflict. Legal experts warn that setting price floors or restricting trade with China could be interpreted as coercive, creating a precedent for retaliatory measures not only in minerals but across technology, finance, and energy sectors.
Between strategic necessity and legal risk
The Washington talks demonstrate that international law and market strategy are increasingly entwined. While rare earth diversification is economically and strategically justified, the legal, diplomatic, and commercial consequences are highly contentious. For investors, policymakers, and multinational corporations, the situation presents a high-stakes dilemma: securing supply chains while navigating the risk of legal disputes, escalating trade wars, and an increasingly confrontational global order.
The controversy is unavoidable. Allies may achieve supply security, but only by walking a razor’s edge between legitimate strategic action and the creation of a new international legal crisis with China. The initiative, if mishandled, could mark the beginning of a geopolitical standoff in global trade law with consequences that extend far beyond minerals.