China Strikes Back: Export Controls on Rare Earths Escalate US-China Trade Tensions

By Metals Minerals Publication On Apr 5, 2025 0

In a bold retaliation against newly announced U.S. tariffs, China has imposed strict export controls on a range of critical rare earth elements. This move, confirmed by the Chinese Ministry of Commerce, comes amid escalating trade tensions and is expected to significantly disrupt global supply chains reliant on these essential minerals.

What Are Rare Earth Elements and Why Do They Matter?

Rare earth elements (REEs) are a group of 17 metallic elements critical to modern technologies, including electric vehicles, smartphones, wind turbines, military hardware, and advanced electronics. Despite their name, these minerals are not particularly rare but are difficult to mine and refine economically and sustainably.

China currently dominates the global rare earth market, accounting for approximately 60% of global production and over 85% of global processing capacity. This makes any policy shift from Beijing a major concern for tech industries and governments worldwide.

The New Export Restrictions

According to a statement from the Ministry of Commerce, the new export controls target seven rare earth elements, including:

Samarium (Sm)
Gadolinium (Gd)
Terbium (Tb)
Dysprosium (Dy)
Yttrium (Y)
Lanthanum (La)
Neodymium (Nd)

These metals are vital for the production of high-performance magnets used in electric motors, drones, satellites, and precision-guided weapons.

The controls, set to go into effect on April 10, 2025, will require exporters to seek new special licenses and undergo rigorous scrutiny. While not a total ban, the restrictions are expected to delay or reduce the volume of rare earth exports, particularly to U.S.-based companies.

A Response to U.S. Tariffs

The move follows Washington’s announcement earlier this week of a 25% tariff on over $50 billion worth of Chinese goods, citing unfair trade practices and intellectual property theft. These new U.S. tariffs were part of broader efforts to “re-shore” manufacturing and reduce dependence on Chinese supply chains.

China’s Ministry of Commerce described the rare earth export controls as “a necessary measure to protect national interests and ensure the responsible use of strategic resources.”

Global Market Reaction

Markets responded sharply. Shares of U.S. tech and defense companies saw immediate declines. Meanwhile, prices of rare earth metals spiked by over 12% in spot markets as buyers rushed to secure future supplies. Analysts warn of long-term disruptions if the standoff continues.

“The timing and targeting of these controls are strategic. It sends a clear message: China is willing to weaponize its control of rare earths,” said Dr. Elaine Chu, a resource economist at the London School of Economics.

Implications for Industry and Geopolitics

The rare earth squeeze is expected to affect a wide range of industries:

Electric vehicle makers like Tesla and BYD may face increased production costs.
Defense contractors relying on neodymium magnets and guidance systems could see delays in procurement.
Renewable energy firms using REEs in wind turbines might need to explore alternative suppliers or technologies.

This development also underscores the urgency for countries like the U.S., India, and those in the EU to ramp up domestic production and recycling of critical minerals. Already, rare earth exploration projects in Australia, Canada, and Africa are seeing renewed interest and investment.