China's sweeping restrictions on rare earth exports threaten the U.S. defense industry, providing President Xi Jinping with powerful leverage over President Donald Trump in upcoming trade talks.

Beijing will not allow the export of rare earth materials for use by foreign militaries, China's Ministry of Commerce announced on Oct. 9. These are the first restrictions imposed by China that specifically target the defense sector, according to Gracelin Baskaran, a critical minerals expert at the Center for Strategic and International Studies .

"What this essentially means is that it will deny licenses to foreign militaries and companies that are producing military use end goods," Baskaran told CNBC. "It undermines the development of the defense industrial base at a time when there is risin

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