China Imposes Export Controls on Rare Earth Minerals

As part of the retaliation against President Trump’s reciprocal tariffs on Chinese goods, China has imposed new export controls on seven additional medium and heavy-rare-earth elements, temporarily suspending their export. The newly affected elements, namely samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, are critical components of a wide range of products, ranging from electric cars and semiconductors to military equipment such as missiles and drones. While the new rules stop short of a full export ban, the affected metals require a special export license, granting Chinese authorities control over who is given access to the critical minerals. China is drafting a regulatory framework for issuing export licenses, which is expected to restrict access to rare earths for specific companies, particularly American military contractors. It is expected to take at least 45 days before these exports might resume under the new regulatory system, disrupting the supply chain. China has also banned Chinese companies from maintaining contact with certain American entities, including those in the military sector.

China accounted for 70% of U.S. rare earth imports between 2020 and 2023. Malaysia, Japan, and Estonia were the other three main suppliers of rare earths to the United States. Between 2020 and 2023, 93 percent of Yttrium compounds brought into the United States came from China. According to the U.S. Geological Survey, the U.S. is 100 percent import reliant for Yttrium, which is primarily used in catalysts, ceramics, electronics, lasers, metallurgy, and phosphors. Samarium and its compounds are used in aerospace manufacturing and the defense sector, and gadolinium is used in MRI scans. Heavy rare earths are particularly crucial for producing magnets capable of maintaining their properties under high temperatures or electrical fields. In 2024, the United States was 80 percent reliant on net imports of rare earths.

China had been producing 99 percent of the world’s heavy rare earth metals until 2023 and still manufactures 90 percent of rare earth magnets globally, with the remaining production coming from Japan and Germany, both of which are reliant on Chinese raw materials. China has rich heavy rare earth deposits near Longnan in Jiangxi Province, where mines extract the heavy rare earths through chemical-intensive processes. Refineries near Longnan process the ores and send them to magnet factories in Ganzhou, such as JL Mag Rare-Earth Company, which supplies major electric vehicle manufacturers such as Tesla and BYD. The processing of rare earths is very energy-intensive, and China’s large coal-fired generating fleet provides cheap energy to do so.

The lack of magnets will result in the inability to assemble cars and other products containing electric motors, which are crucial components of electric cars, drones, robots, missiles, and spacecraft. Gasoline-powered cars also use electric motors with rare earth magnets for critical tasks like steering. These rare earth metals also go into manufacturing jet engines, lasers, car headlights, and certain spark plugs. They are also used in capacitors, which are electrical components of the computer chips that power artificial intelligence servers and smartphones.

From 1940 to 1990, the United States produced and mined its own rare earth minerals at the Mountain Pass mine in California. Until the 1980s, the United States was one of the world’s largest producers, but it was usurped by China due to its substantial deposits, cheap labor, and lax environmental standards. Even today, the Mountain Pass mine is the only U.S.-based source of rare earths. The mine had closed in the fourth quarter of 2015 due to China’s competitive prices, opposition from environmentalists, and U.S. environmental regulations escalating the cost of production, but returned to production in 2018 during President Trump’s first term. It was run by Molycorp before it went bankrupt and then was bought by MP Materials, which is partially owned by a Chinese company, in 2017. In 2024, the United States produced an estimated 45,000 metric tons of rare earths, up from 18,000 metric tons in 2018 — a 150% increase. The rare earth ore that the United States mines at Mountain Pass gets shipped to China to be upgraded into compounds and products, which are then shipped back to the United States

As IER has pointed out in its report on “The Economic and Strategic Importance of Domestic Mineral Production,” U.S. dependency upon others for mining, which could be conducted in the United States, places the nation’s economic and national security in peril, particularly since U.S. dependency on China for rare earth minerals is almost four times its dependency on OPEC when the United States was a major oil importer. President Trump has directed his departments and agencies to reinvigorate mining in the United States, including orders on coal that may contain significant amounts of rare earth minerals in its ash streams, offering a new way to secure domestic supply.

Conclusion

Before its latest move, China had imposed outright bans on the export of three metals to the United States and placed export controls on others. China blocked the sale of gallium, germanium, and antimony to the United States in response to the Biden administration’s efforts to block sales of advanced chips to China. Now, in response to Trump’s 145% tariffs on China, China has imposed 125% tariffs on U.S. goods and has temporarily blocked exports of seven rare earth critical minerals until a regulatory framework for issuing export licenses is developed, which will give Chinese authorities control over who is allowed to access their critical mineral exports. China produces 70% of the world’s critical minerals and is the biggest supplier to the United States. Rare earths are a major component of magnets, of which China controls 90% of the world’s supply. China can mine and process rare earth minerals due to its cheap labor, lax standards, and inexpensive coal-powered energy.