As President Donald Trump prepares for a visit to South Korea later this month, the stakes have risen significantly with China’s recent announcement of expanded export controls on rare earth and permanent magnet materials. This development comes ahead of Trump’s expected meeting with Chinese President Xi Jinping, marking their first interaction since 2019. China’s Ministry of Commerce has implemented Announcement No. 61 of 2025, which introduces the strictest export controls on rare earths and permanent magnets to date. This strategic move not only bolsters Beijing’s leverage ahead of high-stakes talks but also jeopardizes U.S. efforts to strengthen its industrial capabilities.
The newly introduced export regulations arrive with the notable introduction of the foreign direct product rule (FDPR) for rare earth materials. This rule, which had long been utilized by the United States to restrict semiconductor exports to China, allows China to impose licensing requirements on foreign companies exporting magnets that include even minimal amounts of Chinese-origin rare earth materials. Furthermore, magnets produced through Chinese technologies are also subject to this licensing framework. The implications are significant given China’s dominant position in the rare earth sector—accounting for approximately 70% of rare earth mining, 90% of its processing, and a staggering 93% of magnet manufacturing.
Rare earth elements play a critical role in several defense technologies. Systems such as the F-35 fighter jets, Virginia and Columbia-class submarines, Tomahawk missiles, and even advanced radar and unmanned aerial vehicles rely on these materials. The U.S. military is already grappling with production challenges, and with China rapidly expanding its military capabilities at a pace estimated to be five to six times faster than that of the United States, the new export restrictions pose heightened risks for U.S. defense capabilities. According to the new regulations set to take effect on December 1, 2025, companies linked to foreign military engagements—including the U.S.—will find it significantly more difficult to obtain licensing for rare earth exports.
China has made it clear that any requests involving military applications for rare earth materials will be automatically rejected. This marks an escalation in China’s strategy to prevent its resources from indirectly contributing to foreign military strength. The current U.S. defense industry already struggles with limited production capacity and rapid scalability, and these restrictions are poised to exacerbate existing vulnerabilities, widening the capability gap between the two countries.
Additionally, export license applications for advanced semiconductor technologies will now undergo a detailed review process. Any materials or equipment related to sub-14-nanometer semiconductors, next-generation memory chips, or semiconductor manufacturing will face stringent scrutiny from Chinese authorities, introducing a new layer of strategic control that could stifle global supply chains.
Beyond the restrictions on exports, China is tightening its grip on the outflow of its skilled workforce and proprietary technologies. Under the new regulatory measures, Chinese nationals are prohibited from participating in or supporting any overseas projects that involve rare earths—unless they obtain special authorization from the government. This approach aims to safeguard the expertise that has positioned China as a leader in the global rare earth market.
As the U.S. continues to contend with these new export controls, many analysts view them as part of China’s broader negotiation strategy. The Ministry of Commerce has expressed China’s openness to dialogue and multilateral cooperation regarding export controls, emphasizing a desire to maintain compliant trade practices. This creates a complex geopolitical landscape where export restrictions not only serve immediate economic goals but also fit within a larger context of negotiations and international relations.
These recent restrictions build upon a series of escalatory measures by China targeting the rare earth sector. In December 2023, China previously banned certain extraction and separation technologies, and in April 2025, it retaliated against U.S. tariffs by imposing restrictions on seven rare earth elements. Despite moments of diplomatic engagement, including a temporary 90-day truce, U.S. manufacturers are facing ongoing challenges due to export license delays and Chinese overproduction, further complicating the bilateral trade relationship.
In response to the growing threat posed by China’s dominance in the rare earth supply chain, the U.S. is taking proactive steps to bolster its capabilities. Currently, Noveon Magnetics is the sole U.S. manufacturer of rare earth magnets, and it has recently entered a partnership with Lynas Rare Earths to develop a domestic supply chain for these critical materials. Additionally, the Department of War has invested in MP Materials to ensure a stable supply of neodymium-praseodymium products essential for manufacturing.
As part of this landmark initiative, the U.S. government is positioning itself as a significant stakeholder in efforts to enhance domestic capacity, with initiatives including a 10-year price floor for critical resources. Furthermore, funding has been allocated to expand processing facilities in Mountain Pass, California, aimed at enhancing capabilities and diversifying the supply chain. Even with these efforts, analysts suggest that it will take time to build up these domestic capabilities, and until then, China will maintain significant leverage over critical supply chains.
In conclusion, the unfolding developments regarding China’s export restrictions present serious challenges for the U.S., particularly in the realms of defense and technology. As tensions between the two countries continue to escalate, the ability of the U.S. to adapt and fortify its own critical mineral supply chains will be crucial in mitigating the risks posed by China’s strategic maneuvers in the rare earth market.
image source from：csis
