The US-China tariff war erupted, and China suspended the export of 7 rare earth metals in April. Beijing has repeatedly stated that the suspension of these 7 rare earth metals and their processed magnets is because they are “dual-use items for military and civilian purposes.” However, in reality, military applications only account for about 5% of the rare earth magnet market.
On May 12, the US and China held negotiations in Geneva and agreed to temporarily reduce tariffs by 90 days. China also agreed to suspend non-tariff measures imposed on the US since early April, including resuming rare earth exports.
Subsequently, Beijing announced a temporary suspension on imposing rare earth and technology export bans on 28 American companies, as well as paused listing 17 American companies on the “unreliable entities list,” with both measures lasting for 90 days. This signifies that Chinese companies can apply to the Ministry of Commerce to sell products to these 45 American companies.
US Treasury Secretary Scott Bessent recently accused Beijing of reneging on its commitment to relax rare earth export controls, a move that has impacted industries such as automobiles and semiconductors, attracting global attention.
It is believed that the US Department of Commerce at one point warned against the global use of Huawei’s AI chips, leading to China once again restricting rare earth exports.
On June 1, US Treasury Secretary Bessent confirmed in a television interview that China did indeed withhold some rare earth agreed upon for release in the Geneva agreement, whether it was due to “system problems” or intentional action remains to be seen after President Trump and Chinese leader Xi Jinping discuss it.
US Trade Representative Jamieson Greer also expressed deep concerns about China’s lack of compliance with the temporary trade agreement. He pointed out that Beijing is unwilling to approve the export of key rare earth materials to the US, which is one of the reasons President Trump previously criticized China for violating the initial trade agreement.
However, China insists that rare earth export controls are “applicable to all countries,” not just the US.
During this period, China demanded separate permits and detailed documentation for each batch of rare earth exports, and the Ministry of Commerce is establishing a rare earth export permit issuance procedure and setting up a rare earth traceability mechanism, leading to delays in rare earth exports.
Currently, some European car companies have been experiencing a prolonged lack of rare earth supply, causing production delays and temporary closures of production lines; similarly, American and Japanese automakers are also facing shortages in rare earth supply.
On June 5, Trump and Xi Jinping held a phone call, and Trump revealed that the discussions included China easing rare earth restrictions, with both teams expected to meet soon. Tensions between the US and China appear to have eased, but whether China will relax rare earth controls remains to be seen in their future actions.
There are 17 metals known as “rare earths,” situated at the bottom of the periodic table. Most of these metals are not actually rare and are found worldwide, but there are limited viable mining reserves available due to the difficulty in isolating these metals individually, requiring over a hundred processing stages and significant acid treatments, making the process complex. Additionally, some rare earth ores contain radioactive elements, improper processing of which could lead to radiation pollution.
China mines 70% of the world’s rare earths, with Myanmar, Australia, and the US contributing the remaining 30%. However, chemical processing of 90% of globally mined rare earths is done in China. Proportionately, China not only processes all the rare earths it mines but also processes almost all of Myanmar’s rare earths and about half of the US’s.
Among the various rare earths, China’s dominance is most notable in 7 rare earths – dysprosium, gadolinium, lutetium, samarium, scandium, terbium, and yttrium – which are the most difficult to extract metals. Beijing halted the export of these rare earths from early April, then loosened restrictions in May.
The weaponization of rare earths by the Chinese Communist Party began in 2011. In 2023, in response to the Biden administration’s chip ban, China again weaponized rare earths. Subsequently, in the escalating tariff war with the Trump administration, rare earths were repeatedly weaponized.
According to CNA, the primary users of these 7 rare earths are in the automotive industry, which relies heavily on heat-resistant rare earth magnets. Brakes, steering systems, and many other motor systems depend on these magnets. A luxury car seat may contain 12 magnets used in adjusting seat motors, and electric vehicles also require these 7 rare earths for their drive motors.
Apart from automobiles, the manufacturing of semiconductors, medical chemicals, robots, offshore wind turbine generators, and various military hardware also require these rare earth magnets. China’s production of rare earth magnets accounts for about 90% of the global supply.
If a supplier for one of these magnet-dependent systems lacks the necessary magnets, entire automobile assembly plants could be forced to close, potentially leading to temporary unemployment for thousands of workers. Currently, China has nearly stopped selling all heat-resistant magnets.
Over a decade ago, the CCP used rare earths as a weapon against Japan, prompting Japan to significantly reduce its reliance on Chinese rare earths. The US and other Western countries have begun taking similar measures. In this tariff war, the CCP’s repeated weaponization of rare earths has actually accelerated the process of the US reducing its dependence on Chinese rare earths.
According to Bloomberg, Jim Litinsky, CEO of US critical materials mining company MP Materials Corp., stated that regardless of how trade negotiations develop, the current system has collapsed and cannot be restored.
He believed that China’s threats indeed changed everyone’s mindset, stating, “The impression I got from conversations with the Department of Defense is that they are fully aware that we cannot rely on China’s magnets to safeguard national security.”
Litinsky noted that with China’s full tariffs and export restrictions, this geostrategic fault line has now become a commercial reality.
Indeed, on his first day in office, Trump signed an executive order calling for the “restoration of America’s mining dominance,” including expanding mining provisions within the US. He has also been working to expand access to critical overseas minerals, including in Greenland and Ukraine.
Europe is also taking action. On Wednesday, June 4, the EU announced the launch of 13 new raw material mining and supply projects outside the EU, covering countries such as Greenland, Serbia, Malawi, South Africa, aiming to strengthen metal and mineral supply chains to support the electric vehicle energy transition, and the defense and aerospace industries.
EU Commissioner for Industry Strategy Stéphane Séjourné stated, “We must reduce dependence on all countries, especially countries like (the) China. China’s export ban further strengthens our determination to promote source diversification.”