China’s latest move to tighten rare earth exports has sparked new concern in the US, especially in defense and technology sectors. The decision requires new licenses for exporting key metals and magnets, which could disrupt American industries and weaken long-term goals in manufacturing and innovation.
Why Rare Earth Elements Matter
Rare earth elements are 17 special metals. They are vital for making electric motors, chips, missiles, drones, fighter jets, and even phones and LED lights. These materials are also used in wind turbines and radar systems.
China leads the world in mining and refining rare earths. This creates a serious problem for the US, which depends heavily on Chinese supplies.
China’s New Export Rules
In April, China introduced new rules covering seven rare earth elements and their magnets. The restricted elements include samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.
Chinese exporters must now get licenses before they can ship these materials. Although China hasn’t completely banned exports, shipments have stopped for now. Officials are still putting the new system in place.
The New York Times reported that some rare earth shipments are stuck at Chinese ports, waiting for instructions.
China also added 16 US companies—mostly in defense and aerospace—to its export control list. These firms now face restrictions when trying to buy items with dual-use applications, including rare earths.
US Vulnerability and Supply Chain Risks
Heavy rare earths like dysprosium and terbium are rare and costly. They resist heat and have strong magnetic properties, which make them crucial in advanced electronics and weapons.
The US has only one rare earth mine—Mountain Pass in California. It provides about 15% of the world’s supply. But China refines nearly all of the world’s dysprosium and 90% of rare earth magnets.
According to the Center for Strategic and International Studies (CSIS), “The United States is particularly vulnerable for these supply chains.” The report stressed that rare earths are vital for submarines, missiles, and aircraft. It added, “There is no heavy rare earths separation happening in the United States at present.”
The Department of Defense (DOD) has invested over $439 million since 2020 to build US processing plants. It plans to create a full domestic supply chain for defense-related rare earths by 2027. However, CSIS warned that these efforts won’t match China’s scale anytime soon.
“Developing mining and processing capabilities requires a long-term effort, meaning the United States will be on the back foot for the foreseeable future,” CSIS said.
Impact on US Industry
The new restrictions hit American industries hard. Electric vehicle makers like Tesla, GM, Rivian, and Ford use rare earth magnets in their motors.
Sam Fiorani from AutoForecast Solutions explained, “China’s ban on rare earth exports to the US slows access to a number of minerals crucial to modern vehicle production.” These minerals are also used in batteries and cameras.
Tesla has already cut its rare earth use by 25% and is working on motors that don’t need them. But other companies still rely on them. GM is exploring other options but hasn’t set deadlines.
Reuters said some Chinese suppliers have used force majeure clauses to cancel deals. This means US buyers can’t count on past contracts.
US automakers are more exposed because they build EV motors in the US. Some European and Japanese firms have more diverse sources.
Prices will likely go up. Fiorani told Yahoo Finance, “These already expensive materials will only increase in cost with China removed as a potential source… Turning to other countries, where their production costs are already higher, will increase prices for manufacturers.”
Threat to US Defense Projects
The rare earth supply issue threatens more than just business. It could hurt key military programs. CSIS warned that shortages may “pose direct threats to US military readiness.”
Even before these restrictions, the US struggled to increase its defense output. A 2022 US Air Force official noted that China builds military systems five to six times faster than the US.
“Further bans on critical minerals inputs will only widen the gap,” CSIS said, “enabling China to strengthen its military capabilities more quickly than the United States.”
Trump’s defense plans, including the next-gen F-47 fighter jet, could suffer. China is already testing its own sixth-gen aircraft like the J-36 and J-50.
The US has looked at getting rare earths from places like Ukraine and Greenland. But experts still question whether those sources are practical and affordable.
Global Response and Alternatives
The US isn’t the only country trying to reduce its reliance on China. Australia and Brazil are working to mine and process rare earths. CSIS suggested the US should support these efforts with diplomacy and funding.
Still, not every country will oppose China’s new rules. Some may cooperate with Beijing to secure their own supply.
Daniel Pickard, trade lawyer and advisor to the US Trade Representative, told Yahoo Finance, “It is important to be aware that there is a big difference between China requiring export licenses as compared to a ban on exports… In many cases there weren’t any actual signs of declining import volumes.”
