In a nondescript government building just east of Tiananmen Square, a small, overburdened department within China’s Ministry of Commerce has become the epicenter of a global economic disruption. Since April, the Bureau of Industrial Security and Import and Export Control—until recently staffed by just 30 people—has held the fate of the international auto, aerospace, and defense industries in its hands.

This obscure unit now oversees China’s export licensing for rare earth magnets, a key material in everything from electric vehicles to wind turbines and F-35 fighter jets. These magnets, which China dominates with over 90% of global supply and processing capacity, were added to an export control list this spring as part of Beijing’s response to escalating tensions with Washington.

China’s surge in transformer exports is a clean read-through on where the global energy system is straining: not at the level of generation alone, but in the hardware that moves electricity from where it’s produced to where it’s consumed.

Power transformers are unglamorous, capital-intensive, and slow to manufacture, but they are now a binding constraint for the electrification cycle, especially as artificial-intelligence data centers, renewable-heavy grids, and industrial electrification all pull on the same limited pool of equipment.

China is poised to respond cautiously to the European Union’s recent decision to escalate tariffs on Chinese electric cars, opting for limited and targeted retaliation rather than a sweeping countermeasure that could escalate tensions further. The EU’s move, which could raise tariffs on Chinese vehicles up to 48% starting next month…