Overview of China's Rare Earth Export Restrictions, By Charles Taylor (Florida)

Contrary to many YouTube videos, China has not implemented a total, outright ban on rare earth exports to the US as of October 12, 2025. Instead, Beijing has progressively tightened export controls through licensing requirements, targeting 12 key rare earth elements (including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, yttrium, holmium, erbium, thulium, europium, and ytterbium) and related magnets/technologies. These measures began escalating in April 2025 in retaliation for US tariffs under President Trump and were further expanded on October 9, 2025, via Ministry of Commerce Announcement No. 61. The restrictions apply globally, but hit the US hardest due to its heavy reliance on Chinese supplies.

This is part of an ongoing US-China trade war, where Beijing uses its near-monopoly (processing ~90% of global rare earths) as leverage ahead of a potential Trump-Xi summit at the APEC forum in South Korea later this month. Exports aren't halted yet, companies must now obtain special licenses, with scrutiny on end-use (e.g., banning shipments to entities linked to US military or semiconductors if they contain even trace Chinese rare earths). Full effects kick in December 1, 2025, giving ~2.5 months for negotiations.

Retaliation Cycle: Triggered by Trump's April 2025 tariffs (up to 100% on Chinese goods) and recent US moves like sanctioning 16 Chinese firms and proposing bans on Chinese airlines using Russian airspace for US routes. China views rare earths as a "strategic asset," echoing Deng Xiaoping's 1992 quip: "The Middle East has oil; China has rare earths."

Strategic Leverage: Builds on prior actions, like the 2023 ban on rare earth extraction tech exports and controls on gallium/germanium. It's Beijing's "lawfare" tool, mirroring US tactics like the Foreign Direct Product Rule, to pressure Washington without full economic self-harm.

The restrictions are already causing market jitters and supply squeezes, but a full cutoff isn't in place. This isn't a quick crisis but a slow-burn escalation that could reshape global supply chains. Here's a phased view:

1.Near-Term (Q4 2025): Negotiations intensify at APEC. China might ease licenses for non-military uses to avoid self-inflicted wounds (rare earth exports are ~1% of its total but vital for revenue). US pushes "friend-shoring" with Australia (Lynas Corp.) and Canada, but scaling takes 2-5 years. Expect production halts in US factories and price spikes (rare earths up 20-50% already).

2.Medium-Term (2026-2027): If unresolved, US defence gaps widen, China could expand its military edge faster. Economy feels pain: EV/wind goals under IRA delayed, job losses in high-tech (e.g., 99K EV jobs at risk). But incentives like DoD's $35M to MP Materials could ramp US output to ~1,000 tons of magnets by late 2025 (still <1% of China's).

3.Long-Term (2028+): Decoupling accelerates. US builds domestic capacity (e.g., Phoenix Tailings recycling to 4K tons by 2027), but pollution/tech hurdles slow it. China risks alienating allies (e.g., EU/Japan diversifying), potentially losing market share. Worst case: Full ban triggers broader trade war, GDP losses in billions, and heightened Taiwan tensions. Best case: Deal struck, stabilising prices but entrenching "de-risking."

Public sentiment on X reflects alarm: Posts highlight US "humiliation" and calls for diversification, with some mocking Trump's options (e.g., "Will they invade China?"). Overall, this strengthens China's bargaining power short-term but underscores the mutual pain of escalation, neither side "wins" a full cutoff.

The moral here is that the US should have seen this coming, and not put all its rare earth eggs in the precarious China Basket.