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What if China retaliates with an export ban of rare earth minerals? This seems to me to be the logical next step. I mean, the rest of the world is not going to sit back and just watch their economies be driven into a recession...

Totally plausible. I’m only commenting on the dynamic wrt oil.

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China has already banned rare earths exports to any buyer even remotely related to US military.
Any exports currently are strictly vetted to ensure they do not have any military end use.
The ability of the US military to build new war materiel is already considerably constrained.

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