China has clamped down on rare earth element exports, sparking global supply chain disruptions and alarm. The nation imposed a new licensing regime in early April that restricts exports of seven principal rare earth elements and permanent magnets. The materials are crucial to markets such as electric vehicles, wind turbines, fighter jets, and robotics. The action came on the heels of US President Donald Trump’s tariff package on April 2.
While China has issued some export licenses, delays and curbs concern manufacturers globally. Firms are concerned about supply shortages that can hit production heavily, particularly in the United States and Europe.
Export Controls Tighten Amid Trade Tensions
China’s new regulations mandate end-use certificates from exporters. Such certificates confirm that materials won’t be used for military intent or re-exported to the US. But most buyers and exporters find these requirements vague and daunting. The intricacy hinders the process of approval, restricting the export of rare earths.
Rajesh Jejurikar of Mahindra & Mahindra stated the certification process is unclear. Likewise, Chengdu Galaxy Magnets supports clients with paperwork but denies any application associated with military use.
Impact on Global Manufacturers
European firms such as Volkswagen have been given only a “limited number” of export licenses. Others describe continued challenges in dealing with China’s export bureaucracy. Federation of German Industries official Wolfgang Niedermark cautioned that Europe’s production is in danger of being seriously harmed if supply disruption continues.
In the US, there is also concern from large companies like Tesla, Ford, and Lockheed Martin. Lockheed has acknowledged that it has sufficient rare earth magnets for its F-35 fighter jets but is dependent on government assistance to have the supplies maintained.
Even with obstacles, some Chinese suppliers such as Yantai Zhenghai Magnetic Material keep shipping after getting approval. Long-standing customers are said to be shipped even without official endorsements. Supply chain analyst Cameron Johnson observes that “material is still going out,” but risks remain high.
Strategic Leverage and Future Outlook
China Ministry of Commerce (Mofcom) remains ambiguous about the extent of the export regime. Trivium China’s Cory Combs describes Beijing’s approach: employing export controls as a bargaining chip and holding out for an acceptable US trade agreement.
Short of an agreement, Western countries are stepping up plans to diversify sources for rare earths. Weaning themselves off China’s rare earth supply chain will be a strategic imperative in the years to come.
China’s rare earth export restrictions unveil weakness in the supply chains across the world. The world is now increasingly under pressure to identify substitutes and stabilize key industries that rely upon these crucial materials.
