What should I do about this rust?

your best option would be to use 2000 grit w/d and retch the blade. ferric chloride avalible at any electronics supply will retch it. google Damascus etching. in fact a retch with a light 2k sanding would probally do the trick. don't forget to wax or oil it to keep it from happening again. any abrasive is gonna damage the etch.
 
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