China Halts Rare Earth Exports: Implications for Global Supply Chains

China has officially ceased exports of seven critical rare earth elements and the magnets produced from them to the United States. This action comes amid rising tensions, with the Chinese government cautioning former President Donald Trump against his reported intentions to stockpile deep-sea metals.

The seven rare earth elements affected—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—have not been shipped from China since April 4, when the country implemented export restrictions in response to Trump’s initial round of “reciprocal tariffs.” Under the new regulations, Chinese exporters are now required to obtain licenses from the Ministry of Commerce for shipments, a process characterized by its lack of transparency and potentially lengthy timelines. Reports indicate that it may take six to seven weeks, or even longer, to secure these licenses.

A rare earth trader in China noted, “When clients inquire about the departure of their cargoes, we estimate a timeline of 60 days, but it could extend beyond that.” The uncertainty surrounding the issuance of licenses and whether any shipments will reach American soil persists, particularly as the trade conflict between China and the U.S. shows no signs of resolution.

Additionally, China has not exported any antimony to European Union countries since it was placed on a control list in September, a move that was a direct response to the EU’s tariffs on imported Chinese electric vehicles. This pattern of retaliation continues with the current restrictions on rare earths destined for the U.S.

U.S. Concerns and Strategic Implications

Certain Chinese ports are still permitting exports of magnets with minimal traces of heavy rare earths, provided they are not intended for the U.S. Other ports have instituted stringent testing protocols. These developments signal escalating tensions in the ongoing trade war between the two largest economies, which poses a significant threat to global supply chains for essential technologies, including electric vehicles, semiconductors, drones, and military applications.

The restricted heavy rare earths and their magnets are crucial for the production of these technologies. American military contractors are particularly alarmed by the implications. James Litinsky, CEO of MP Materials, stated, “Drones and robotics are widely considered the future of warfare, and the critical inputs for our future supply chain are now being shut down.” Daniel Pickard, chairman of the U.S. Trade Representative’s critical minerals advisory committee, echoed this sentiment, indicating that China’s export limitations could have “severe effects” in the U.S.

Stockpiling Deep-Sea Metals: A Strategic Response?

In light of China’s export restrictions, the Trump administration has escalated tariffs on Chinese goods, now reaching an unprecedented 145%. This includes rare earths, which are vital for numerous industries in the U.S. The Financial Times recently reported that the administration is drafting an executive order to facilitate the stockpiling of deep-sea metals to mitigate China’s dominance in supply chains for battery minerals and rare earths. The proposed stockpile would be aimed at ensuring availability on U.S. soil for future needs, particularly in the event of import disruptions due to geopolitical tensions.

In response, China’s foreign ministry asserted that no country should bypass international laws for resource exploration in the seabed, emphasizing that these resources are the “common heritage of mankind” and must comply with the United Nations Convention on the Law of the Sea.

Minimal Impact on China, Long-Term Global Ramifications

China currently accounts for approximately 90% of global rare earth production and is the primary supplier of these critical elements worldwide. Prior to 2023, it supplied 99% of the world’s heavy rare earth metals. While a refinery in Vietnam contributed a small fraction of the supply, it has been inactive due to a tax dispute. Furthermore, China also produces 90% of rare earth magnets necessary for various applications, including automotive and defense industries.

Recently, China’s rare earth exports surged over 20% amid concerns about supply disruptions in Myanmar, where armed conflicts have affected mining operations. The combination of these disruptions and China’s export restrictions places more than 75% of the global supply of medium and heavy rare earths at risk.

While stockpiles may address near-term demand, analysts predict they will only last until mid-2025. Neha Mukherjee, a senior analyst at Benchmark Mineral Intelligence, cautioned that these disruptions could lead to short-term price spikes for rare earths.

Despite the significant risks posed to global technology supply chains, the impact on China is expected to be limited, as rare earths constitute a small portion of China’s overall exports to the U.S. and the global market. However, the ongoing situation may prompt foreign buyers to expedite their diversification efforts away from reliance on Chinese supplies, albeit a process likely to unfold over an extended period.