This article has been edited to reflect a dispute about whether Deng Xiaoping made his observation about oil and rare-earth elements in 1991 or 1992.

“The Middle East has oil, China has rare-earth elements,” Chinese leader Deng Xiaoping declared in the early 1990s. This quote has been repeated a lot lately as Beijing has used its near monopoly on the rare-earth industry to effectively push back against U.S. President Donald Trump’s latest trade war. It is often cited as evidence that implicit in Deng’s statement was a coercive threat: just as Arab oil states weaponized their petroleum exports in 1973—cutting off the West to punish it for backing Israel in the Yom Kippur War—China would one day do the same with rare earths.

The events of the past year have only deepened that conviction. Last November, for instance, after China had announced its licensing regime for rare-earth exports, the bipartisan U.S. House Select Committee on China said that Chinese leader Xi Jinping was “actualizing Deng’s vision.” Trump posted on social media that it was “obviously a plan devised by [China] years ago.” And Miles Yu, who served as chief China policy adviser to Secretary of State Mike Pompeo during the first Trump administration, wrote that “Beijing’s rare earths monopoly is no accident of geology. It is the product of a deliberate, decadeslong strategy to control the extraction and refining of the elements that make up the modern world.”

There is no doubt today that China’s control of rare earths represents a powerful weapon—one that has provoked worldwide alarm and a race to secure alternatives. China not only sits on the world’s largest known reserve of rare-earth elements but also dominates approximately 85 percent of global processing. Despite being a small industry, the role of rare earths in modern technologies is mighty. Because these 17 elements—especially the scarcer heavy rare-earth elements—are so essential to semiconductor production, defense technologies, automobiles, and clean energy, China’s role in their supply chain represents a significant chokepoint in the global economy.

But even though China has sought to take advantage of its position, its dominance is not the result of a grand, far-sighted scheme to hold the world hostage. In reality, it is the result of an idiosyncratic and evolving mix of domestic interests set against a backdrop of broader global economic and technological change. When Deng spoke, for instance, the United States had just concluded the first Gulf War. From Beijing’s perspective, the American-led campaign was a visceral reminder of China’s vulnerabilities in both the conduct of modern warfare and the role that key resources could play in inciting conflict. As Deng pointed out around the same time, “We haven’t paid enough attention to how to use this treasure. We must protect rare-earth resources.”

This was easier said than done. Early efforts to consolidate China’s market position began as an effort to rein in unruly domestic competition that kept prices low and risked depleting Chinese resources. They did not originate in a strategic effort to weaponize supply chains in a geopolitical fight. In fact, China’s rare-earth industry remained so loose and ad hoc that it’s not even clear Beijing had full control over it 20 years later, during the infamous 2010 incident over the island chain known as the Diaoyu in China and the Senkaku in Japan. After China and Japan skirmished over the disputed islands, rare-earth exports to Japan were indeed temporarily restricted—causing the Deng quote to go viral for the first time—but research suggests it might not have been a carefully designed plan to punish Japan. As is the case with many of China’s policies, there is often a large gulf between words and deeds, and studying China’s history with rare earths reveals the amalgam of competing priorities that have shaped its policy.

Beijing has recognized rare earths as a geoeconomic weapon only since 2010—and, in the process, learned how to wield such an arsenal from the United States’ sanctions and export controls. The current rare-earth standoff and ongoing supply chain weaponization do indeed pose a grave threat to global stability and prosperity. But it is less a Chinese master plan coming to fruition than the result of two powers locked in an action-reaction spiral that neither set out to start—and that neither fully controls.

Correcting this narrative and understanding how China came to dominate the rare-earth market matters because it helps illuminate the current security dilemma between Beijing and Washington: when one country takes actions to increase its own security, the other feels threatened, precipitating its own actions and furthering the escalatory spiral. But as China and the United States now race to gain future leverage over each other, the risks are not limited to economic warfare. Fears of future economic and supply chain weaponization have fostered a growing estrangement between the two countries, feeding a broader hostility that empowers more aggressive voices on both sides of the Pacific. Stabilizing this spiral will not be easy. But it will help both countries, and the world, avoid an even worse fate.

The Bayan Obo mine in Inner Mongolia has anchored China’s rare-earth industry since the late 1950s, and it still holds the world’s largest deposit. In the 1960s, Jiangxi and Guangdong Provinces in southern China had their own discoveries and later emerged as the epicenter of heavy rare-earth mining and processing. But it was not until the early 1980s, after the chemist Xu Guangxian developed a new, cheaper method for separating rare earths from each other, that China achieved high-quality output at scale. Xu’s discovery coincided with the rapid growth of the global semiconductor industry, and domestic and overseas demand for rare earths rose sharply.

Chinese leaders started to see rare earths as a natural resource the country could not afford to squander. As early as 1982, Deng and Vice Premier Fang Yi ordered the country to “increase the production of rare-earth metals and rare metals.” But throughout the 1980s, the central government’s first priority was to accumulate more foreign exchange reserves, so it tolerated a relatively lax set of controls in the rare-earth sector to encourage exports. “Cheap and dirty” became the defining features of destructive, small-scale mining, with most of the exports going to Japan, the United States, and Europe. China’s output surged to more than ten times its 1978 level by 1986, and China surpassed the United States as the world’s largest rare-earth producer by the early 1990s.

The United States and Europe welcomed the development. Rare earths are not, in fact, rare: the historical misnomer results from unfamiliarity at the time of their discovery. But it is relatively unusual to find rare earths in concentrations that make mining worthwhile, and processing them is both technologically demanding and incredibly polluting. Improving raw ore, for instance, involves releasing water that is contaminated with radioactive pollutants, creating health issues for workers and local residents. From a Western perspective, offshoring the extraction and processing of rare........

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