On April 4, China’s Ministry of Commerce imposed export controls on seven rare earth elements in response to tariffs implemented by President Donald Trump on Chinese goods.
This action marked the beginning of significant disruptions for industries in the United States and Europe, particularly in sectors reliant on rare earths, such as automotive manufacturing, robotics, and defense.
The situation intensified as U.S. manufacturers began shutting down operations due to shortages, while hundreds of export license applications were submitted to Chinese authorities with an estimated 25 percent approval rate.
The delays in issuing export licenses severely impacted auto manufacturers in the U.S., Europe, and Japan, who rely on these minerals for a variety of essential components.
Ford, for instance, had to halt production of the Ford Explorer at its Chicago plant for a week in May due to a lack of access to rare earths.
Moreover, the European Association of Automotive Suppliers expressed alarm over several plants going offline due to China’s export controls.
Nissan and Suzuki Motor in Japan also reported supply disruptions, with Suzuki suspending production of its Swift car due to the ongoing crisis over rare earth materials.
Even German automakers, despite previously securing a limited number of licenses, began reporting supply bottlenecks.
Volkswagen and Mercedes-Benz communicated differing levels of impact from the restrictions; while Volkswagen indicated it faced no shortages, it simultaneously developed plans to stockpile critical components.
Notably, shipments of rare earth magnets to Germany from China plummeted by 50 percent from March to April, prompting concerns from German magnet manufacturers about potential factory idling without new supplies.
In response to China’s chokehold on rare earth elements, the Trump administration took a firm stance against Beijing.
On May 28, President Trump accused China of breaching the agreement made in Geneva on May 11.
This accusation led Secretary of State Marco Rubio to announce an aggressive initiative to revoke visas for Chinese students, specifically targeting those with ties to the Chinese Communist Party or enrolled in critical academic fields.
On the same day, President Trump directed companies that manufacture semiconductor design software to cease sales to Chinese entities, part of a broader strategy to curb China’s technological advancements.
By June 11, U.S. and Chinese officials reached a new agreement aimed at restoring U.S. access to rare earth elements.
Reports indicated that as part of this deal, China would supply the United States with rare earths and permanent magnets upfront, while the U.S. would maintain a 55 percent tariff on certain Chinese imports.
The tariff breakdown included a 10 percent reciprocal base tariff, an additional 20 percent tied to fentanyl trafficking, and a 25 percent tariff on existing duties, while China would impose a 10 percent tariff on U.S. goods.
In a surprising shift from prior announcements, the U.S. would also allow Chinese students to continue studying in American institutions.
Despite the optimism associated with this deal, experts warn that it may not fully resolve the ongoing rare earth crisis.
The administration is hopeful that automakers and suppliers will regain their access to critical mineral supply chains once the arrangement is finalized.
However, the unstable nature of U.S.-China relations, particularly around trade, suggests that any truce may only be temporary.
President Trump has consistently revised his tariff policies, while China’s use of mineral restrictions as leverage has grown more pronounced in recent years.
The ultimate solution to the rare earths issue lies in establishing alternative supply chains that reduce U.S. dependence on China.
Efforts are underway to expand domestic rare earth mining, refining, and magnet manufacturing capabilities, in addition to collaborating with international partners to explore new deposits and create processing hubs.
In alignment with this objective, President Trump has emphasized the importance of rare earths in various foreign policy discussions, underscoring their significance to national security.
During his state visit to Saudi Arabia, he signed a memorandum of cooperation concerning critical minerals, aiming to advance partnerships that enhance supply chain security.
Australia is emerging as a key ally in the initiative to minimize reliance on Chinese heavy rare earths.
As the fourth-largest global producer of rare earth elements, Australia is actively expanding its domestic processing capabilities.
Iluka Resources’ Eneabba Rare Earths Refinery in Western Australia is a notable project, backed by a $1.25 billion government loan, and is set to begin operations next year.
The facility will produce separated rare earth oxides, including essential minerals like neodymium and praseodymium.
Additionally, Arafura Rare Earths Limited is moving forward with its Nolans Project, having secured $840 million in federal funding, which is expected to meet 4 percent of the global demand for neodymium and praseodymium by 2032.
Overall, Australia aims to triple its output of mined rare earth oxides between 2025 and 2027 to fulfill growing global needs.
Domestically, the Trump administration has issued Executive Order 14241, which directs federal agencies to expedite the permitting process for mineral projects and utilize the Defense Production Act to promote the mining and processing of critical minerals on public lands.
While the U.S. currently lacks heavy rare earth separation capacity, efforts are in progress to develop this necessary capability.
In its 2024 National Defense Industrial Strategy, the Department of Defense has set a target to establish a fully integrated mine-to-magnet rare earth supply chain that meets all U.S. defense requirements by 2027.
Since 2020, the Department of Defense has invested over $439 million to bolster domestic supply chains, including a $9.6 million award to MP Materials for a light rare earth separation facility in California and a subsequent $35 million for a heavy rare earth processing facility.
These projects represent the first fully integrated rare earth facilities within the United States, encompassing the entire process from mining to manufacturing.
However, even with these developments, projections suggest that MP Materials will produce only 1,000 tons of neodymium-iron-boron magnets annually by the end of 2025, which is significantly less than the 138,000 tons produced by China in 2018.
The current landscape indicates that while steps are being taken to improve the domestic supply of rare earths, ongoing reliance on China poses a notable risk to the U.S. economy, especially in key sectors.
As the situation evolves, the interplay between U.S. policy, global supply chains, and China’s strategic maneuvers will continue to shape the dynamics of critical mineral availability in the coming years.
image source from：https://www.csis.org/analysis/trump-strikes-deal-restore-rare-earths-access
