Table of Contents
On April 4, 2025, China’s Ministry of Commerce imposed export restrictions on seven rare earth elements (REEs) and magnets used in critical sectors such as defense, energy, and automotive industries. The restrictions were enacted as a response to U.S. President Donald Trump’s tariff increases on Chinese products, and they include key elements like samarium, gadolinium, and terbium. While the new restrictions don’t constitute a ban, they require firms to secure special export licenses to ship these minerals and magnets abroad. The decision sent ripples through the global market, particularly within industries heavily reliant on these materials.
Implications for U.S. Sourcing of Critical Rare Earths
The most pressing question remains: How will these new export restrictions impact the United States’ access to critical minerals needed for defense technologies?
China’s restrictions on seven medium and heavy REEs could disrupt U.S. supply chains, as the United States remains highly dependent on China for refined rare earth elements. While the Chinese government has not outright banned exports, the licensing requirement will likely cause a temporary halt in exports as China establishes the system. The U.S. entities affected include 16 major defense and aerospace companies, who now face limitations in acquiring dual-use goods.
For the U.S., this restriction on REEs could add significant pressure on defense manufacturing, with companies reliant on these minerals for critical equipment like F-35 fighter jets, Tomahawk missiles, and submarines. While the licensing system may not be permanent, it represents a serious shift that could result in global supply disruptions. Countries outside the U.S. may seek to collaborate with China to avoid similar disruptions, presenting a challenge for those seeking alternative supply chains.
The Significance of Heavy Rare Earths and U.S. Vulnerabilities
China’s focus on medium and heavy REEs is a significant move considering the U.S. vulnerabilities in rare earths processing. Before 2023, China accounted for 99% of global processing of these minerals. With Vietnam’s refinery now inactive due to a tax dispute, China holds a monopoly on the supply chain for these critical minerals.
REEs like samarium, gadolinium, and yttrium are essential components in various U.S. military technologies. Their importance to national security cannot be overstated. For example, the F-35 fighter jet alone contains over 900 pounds of REEs, which are crucial for propulsion and radar systems. The Virginia-class submarines and Tomahawk missiles also rely heavily on these elements.
Given this reliance, China’s monopoly over heavy REEs puts the U.S. defense industry at a severe disadvantage, especially when it comes to competing with China’s rapidly expanding military capabilities. While there are efforts underway to build alternative sources, these projects are still in their infancy, and the U.S. is not yet equipped to meet its full defense needs.
U.S. Rare Earths Industry: The Challenge of Filling the Gap
The U.S. rare earths industry is still in the early stages of developing its own supply chain. Despite efforts to build domestic capabilities, such as MP Materials receiving $9.6 million from the Department of Defense (DOD) in 2020 for a light rare earths separation facility, the country remains far from being self-sufficient.
The DOD’s goal is to create a fully integrated mine-to-magnet supply chain for rare earth elements by 2027, but current projections indicate it will take much longer to rival China’s processing capacity. MP Materials in California is projected to produce just 1,000 tons of magnets by 2025, which is less than 1% of what China produced in 2018. Additionally, USA Rare Earths made significant strides with its first dysprosium oxide sample, but these are small-scale breakthroughs—the path to large-scale commercial production remains a massive undertaking.
Despite DOD investments totaling over $439 million since 2020, the U.S. rare earths industry will need years of additional investment and technological development to reduce reliance on China. By that time, China’s technological edge in refining and processing these minerals will likely have deepened, leaving the U.S. playing catch-up in this strategically critical sector.
Could the United States Have Anticipated This?
In hindsight, China’s weaponization of rare earths is not entirely unexpected. The first incident of this nature occurred in 2010, when China banned rare earth exports to Japan over a territorial dispute. Since then, China has continued to use its dominance in this sector to exert pressure on countries that challenge its economic or geopolitical interests.
The U.S. government and industry experts have been aware of this vulnerability for years, yet efforts to build an alternative supply chain have not kept pace with China’s rapidly expanding capabilities. Reports, such as the 2023 Strategic Competition report by the U.S. Select Committee, have suggested that the U.S. should incentivize the production of rare earth magnets to prevent a future crisis. Unfortunately, despite such warnings, the U.S. remains reliant on imports from China, and alternative supply chains remain largely underdeveloped.
Sourcing Alternatives: Can the U.S. Find Other Suppliers?
In terms of finding alternative suppliers for heavy rare earths, the options are limited, but there is some hope. Australia, Brazil, South Africa, and Japan are all working to develop their own rare earth deposits. For example, Australia’s Browns Range is poised to become the first significant dysprosium producer outside of China. However, much work remains in developing the necessary processing and refining capabilities outside of China, as Australia’s Lynas Rare Earths still sends its refined minerals to China for final processing.
Moreover, countries like Japan and Vietnam are enhancing their REE extraction and processing technologies, which could help diversify the global supply chain. Still, China’s near-total monopoly on rare earth refining leaves many countries reliant on its supply, and the U.S. will likely have to invest heavily in diplomatic and financial support to help these alternatives succeed.
Conclusion
China’s new export restrictions on rare earth elements serve as a stark reminder of the global supply vulnerabilities tied to these critical minerals. The United States faces a long-term challenge in reducing its dependence on Chinese rare earths, especially in defense technologies. While alternative supply chains are being developed, the road to independence will require significant investment, technological advancements, and international cooperation. Until then, the U.S. must navigate a strategic gap and respond to China’s dominance in the rare earth sector.
Author Profile
Latest entries
Arms Control TreatiesApril 19, 2025Averting Unconstrained Nuclear Risks with Russia: The Impending New START Expiry
Economics and TradeApril 19, 2025Beyond Tariffs: What the U.S. Can Learn from China’s Industrial Playbook
Defense and SecurityApril 19, 2025The Consequences of China’s New Rare Earths Export Restrictions
Defense and SecurityApril 18, 2025Trump Restructures the Pentagon Budget