Highlights

• China's Busan 'truce' merely suspended new October 2025 export rules while keeping April's licensing regime fully operational—a tactical pause, not a policy rollback.
• Beijing's ambiguous 'relevant measures' language and extraterritorial controls preserve its dominance over 85-90% of global rare earth refining and 93% of magnet production.
• The U.S. won short-term relief but traded away tariff leverage without addressing its fundamental dependency—Western supply chain alternatives remain 5-10 years away.

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At the U.S.–China trade talks in Busan in late October 2025, Beijing agreed to “suspend the implementation of the relevant export control measures” for one year. American headlines touted a reprieve from China’s rare earth export curbs, but the fine print tells a different story. Beijing’s promise was carefully couched with the qualifier “relevant”, leaving it ambiguous which controls are actually on hold. In reality, China has simply reverted to its April 4, 2025 export licensing regime – not the harsher new rules unveiled on October 9 – which means existing restrictions remain very much in force. The ink on the Busan handshake was barely dry before Beijing’s intentions became clearer: what initially looked like a one-year relief is essentially a quiet return to the status quo ante, hardly a gift to Washington.

Inside the April 4 Rules: Subtle but Potent Controls

On April 4, 2025, China imposed export controls on seven categories of rare earth elements and related products that are vital for defense and high-tech applications, as cited via Reuters (opens in a new tab). This Ministry of Commerce regulation (Announcement No. 61, 2025) placed medium and heavy rare earths – including dysprosium, terbium, samarium, gadolinium, lutetium, scandium, and yttrium – under a new export licensing regime. Exporters must now seek case-by-case government approval for overseas shipments of these materials, especially if deemed relevant to national security or defense.

While this isn’t an outright embargo, it “institutionalizes discretion”: Beijing can throttle supply by simply limiting or slowing the issuance of licenses. Indeed, Chinese authorities have broad latitude to evaluate each shipment’s end use and destination, demanding extensive end-user documentation and even technology transfer (opens in a new tab) disclosures before approval. The process involves multiple bureaucratic layers and can drag on for months, adding friction and uncertainty for Western buyers. In short, the April 4 controls gave China a powerful veto over rare earth exports without ever announcing an explicit ban. Beijing can appear to comply with trade norms while selectively tightening the tap whenever geopolitically convenient. As one analyst observed (opens in a new tab), “They picked the things that are crucial for the U.S. economy”, targeting exactly those elements (like Dy and Tb) that U.S. defense contractors cannot easily source elsewhere.

October 9 Escalation – Announcement 61’s Article 1(1) and Extraterritorial Reach

Fast forward to October 9, 2025: China dramatically expanded its rare earth export controls, rattling global markets. Five additional rare earth elements – holmium, erbium, thulium, europium, and ytterbium – were added to the controlled list (bringing 12 of the 17 rare earths under restrictions) as reported by REEx and Reuters (opens in a new tab).

More provocatively, Beijing rolled out new extraterritorial rules that mimic U.S.-style export curbs.

Article 1(1) of MOFCOM’s Announcement No. 61 introduced a sweeping de minimis rule: any foreign-made rare earth magnets or materials containing ≥0.1% Chinese-origin rare earth content by value would require a Chinese export license. In other words, a Japanese or American magnet producer using even trace amounts of Chinese dysprosium or samarium could be subject to Chinese jurisdiction.

Article 1(2) added a “Foreign Direct Product” rule extending controls to items made with Chinese rare earth technology (mining, processing, or magnet-making know-how), even if they contain no Chinese material. Together, these measures asserted China’s right to license and veto foreign downstream products, an unprecedented extraterritorial reach into global supply chains.

Beijing also announced that overseas end-users with military affiliations would be presumptively denied licenses – effectively a rare earth embargo on foreign defense contractors. These rules were set to take effect soon (Nov 8 for the new elements, and Dec 1, 2025, for the foreign-entity provisions), reported ECAG (opens in a new tab).

It was this Article 1(1) “0.1% rule”, aimed squarely at foreign firms, that drew intense U.S. ire – President Trump publicly blasted Beijing for attempting to control American and allied industries using Chinese minerals. The move was widely seen as Beijing’s retaliation for U.S. tech export bans – “flipping the script” by leveraging China’s mineral dominance akin to how the U.S. uses its semiconductor choke points, per a Reuters assessment (opens in a new tab).

The impact was immediate: rare earth mining and magnet companies’ stocks swung wildly on fears of supply disruptions, and U.S. officials warned (opens in a new tab) of “China’s effort to exert control over the entire world’s technology supply chains”.

The Busan Trade Truce – Beijing Didn’t Blink, It Bought Time

Facing these escalatory measures, Washington raced to strike a deal before the December deadline. High-level negotiations in Kuala Lumpur (Oct 25–26) paved the way for an accord, finalized when President Trump met President Xi in Busan, South Korea, on October 30. China agreed to postpone its new rare-earth rules by 1 year—a tactical pause welcomed by industry—and, in return, the U.S. offered tangible concessions. Trump announced a 10% cut in certain tariffs on Chinese goods, a mutual one-year suspension of new “port fees” on each other's shipping (which had been an irritant in the trade war), and a pledge to freeze new export-control blacklist additions for now, as we reported at REEx.

Beijing’s official messaging, however, was notably muted. As REEx noted, the joint communiqué from China’s Foreign Ministry omitted any mention of rare earths, leaving state media like Xinhua to vaguely note the “suspension of the implementation of relevant export control measures”. That single word – “relevant” – is China’s insurance policy: by not specifying which measures are suspended, Beijing retains full flexibility to interpret the deal on its own terms. Practically, what China suspended were the new October 9 measures (e.g., adding more elements and the extraterritorial rules), which had not yet taken effect. What China did not suspend are the underlying April 4 licensing controls, which remain fully operational, reports Eric Hendrich at Raw Materials.net (opens in a new tab).

In the Commerce Ministry’s own words, the new rules will be studied and refined over the coming year, but the April regime continues to govern exports in the meantime. In essence, Washington got relief from additional pain, but no rollback of the existing chokehold. As trade analysts noted, China “will _study and refine specific plans_” for its export controls – diplomat-speak that signals the policy could be tweaked and reinstated whenever it sees fit.  Little wonder that Chinese negotiators were willing to grant this temporary pause: it defused U.S. pressure while preserving all of Beijing’s leverage.

Strategic Ambiguity: A Pause, Not a Pivot

Beijing’s maneuver is less a concession than a calibration. By agreeing to a one-year pause, as cited via Reuters (opens in a new tab), China neutralized the immediate trigger for U.S. retaliation (e.g. the threatened tariff hikes to 54% on Chinese goods that prompted China’s October 9 response) and garnered goodwill in talks, without surrendering its strategic advantages. Crucially, China retains the legal and regulatory tools to throttle rare earth exports at will. The dual-use license system from April – covering the most defense-critical rare earths – is still in force and can be tightened administratively simply by delaying or denying license approvals.

The vague wording of the suspension grants Beijing wide latitude: if geopolitical winds change or if Washington takes actions Beijing dislikes, Chinese authorities can claim certain exports fall outside the “relevant measures” that were paused and quietly reinstate stricter controls. In diplomatic chess terms, China has achieved “tempo control” – pausing the game on its terms, without losing position. An apt illustration came in the Chinese Foreign Ministry’s handling of the deal: by omitting rare earths from the formal announcements, Beijing signaled that this was not a permanent policy shift, just a tactical timeout. Meanwhile, state-run outlets in China emphasized continuity, noting that exports would still be “subject to laws and regulations” and that authorities would “study and refine” the rules – hinting that tougher measures could return after “refinement.”

This strategic ambiguity keeps foreign consumers of rare earths guessing and maintains pressure on industries to remain in Beijing’s good graces. As Rare Earth Exchanges analysts observed, the suspension’s wording gives China flexibility to reinstate restrictions at will – effectively holding a sword over the global supply chain while appearing reasonable. Beijing managed to appear as a conciliator (averting a rare earth crisis and helping stabilize markets) without truly ceding its dominance.

Washington’s Enduring “Chemistry Problem”

For all the political theatrics, the fundamental reality remains unchanged: the U.S. and its allies are still deeply dependent on China’s rare earth supply chain. America’s real vulnerability lies not in the mines but in the processing and magnet production capacity – the “chemistry” of turning rare earth oxides into refined metals and powerful magnets. China accounts for an estimated 85–90% of global rare earth refining and alloying capacity, and around 93% of high-performance magnet manufacturing. This choke point means that even if the U.S. mined all the ore it needs (the U.S. has only one operating rare earth mine at Mountain Pass), it would still have to ship those materials to China (or Chinese-run facilities) for separation and refining.

That bottleneck was decades in the making, and it cannot be eliminated in a mere year of truce, despite POTUS' public comments to the contrary.  Projects are underway – MP Materials’ new magnet factory in Texas, and an Australian Lynas Corp separation plant also in Texas – but they are years from scaled production and riddled with execution challenges. Heavy rare earth separation (for elements like Dy, Tb, Yb) is even more technically complex, and currently no Western facility can do it at scale (one reason even “independent” sources like Estonia’s new magnet plant still rely on Chinese feedstock). Thus, each month of “stability” under this deal is effectively another month for China to strengthen its lead: Chinese firms continue refining, innovating, and expanding their magnet output, while Western rivals are still securing permits, funding, and trying to scale lab projects to commercial viability. As REEx experts warned, unless the U.S. and its partners use this grace period to aggressively invest in domestic capacity – from processing to magnet manufacturing – the one-year pause will only reinforce U.S. dependency rather than spur autonomy. Biden, to some extent, and now President Trump have made moves (funding pilot programs, stockpiling, international partnerships), and more recently, under Trump 2.0, substantial investment, but even optimistic timelines show a 5–10 year horizon to build an end-to-end supply chain outside China. In the interim, Beijing holds the high ground on rare earths; any future flare-up – say a Taiwan Strait crisis or a new tech sanctions spat – could see China swiftly reimpose export hurdles, exploiting the very dependence that this deal leaves in place.

Short-Term Calm, Long-Term Costs

The much-heralded rare earth “truce” of October 30, 2025, looks more like a temporary reprieve than a real resolution. China’s suspension of its October rules is effectively a rollback to the April 4, 2025 baseline – a regime that still binds seven of the most critical rare elements under strict licensing. Supply chains for dysprosium, terbium, and other defense-related rare earths will remain tight and under Chinese oversight despite the deal. At least that’s the REEx understanding to date.  The U.S., for its part, traded away some leverage (tariff reductions and other economic relief for Beijing) in exchange for what certainly seems like an ambiguous promise.

The asymmetry is stark

Washington “won” a news cycle of positive press and avoided an immediate supply shock, but Beijing kept its grip on the periodic table. By design, the agreement leaves key questions unanswered – what exactly is “relevant,” which exports will be approved or denied during the suspension, and what happens after one year? In all likelihood, unless a broader trade détente is reached, China will reintroduce refined export controls in late 2026 (or even sooner if provoked), having lost little in the interim. One might call this outcome a diplomatic draw at best, or a strategic stalemate masked as a breakthrough.

Summary

As China’s unofficial messaging makes clear, this was not a capitulation – it was a calculated pause that buys Beijing time and goodwill. For the United States and other rare-earth-consuming nations, the “grace period” could prove a costly illusion if it breeds complacency. Building resilient rare earth supply chains will require years of focused investment and coordination, as REEx continues to point out; a one-year timeout – with China still effectively setting the rules – does little to alter that reality. In the end, the rare earths saga of 2025 underscores a sobering lesson: real leverage in the tech competition isn’t just about tariffs or summits, but about mastering the unglamorous fundamentals – in this case, chemistry, refinin,g and manufacturing. Unless that gap is closed, deals like these merely kick the can down the road, leaving America applauding a “win” while still dancing to Beijing’s tune when it comes to critical minerals.

Sources:

• Reuters – “China hits back at US tariffs with export controls on key rare earths” (April 4, 2025)reuters.com (opens in a new tab)reuters.com (opens in a new tab)
• Reuters – “China expands rare earths restrictions, targets defense and chips users” (Oct 9, 2025)reuters.com (opens in a new tab)reuters.com (opens in a new tab)
• AFP via The Economic Times – “China suspends some rare earths-related curbs for 1 year” (Oct 30, 2025)economictimes.indiatimes.com (opens in a new tab)economictimes.indiatimes.com (opens in a new tab)
• Project Blue – “China to suspend rare earth export controls for one year” (Oct 30, 2025)projectblue.com (opens in a new tab)projectblue.com (opens in a new tab)
• Rare Earth Exchanges – Analysis of China’s rare earth export policy (Oct 30, 2025)wordpress-1542803-6000058.cloudwaysapps.comwordpress-1542803-6000058.cloudwaysapps.com
• RawMaterials.net – “China Suspends Tightening of Rare Earth Restrictions” (Oct 30, 2025)rawmaterials.net (opens in a new tab)
• China Briefing – “China’s Rare Earth Export Controls – Impact on Businesses” (Oct 30, 2025 update)china-briefing.com (opens in a new tab)ecag.com.au (opens in a new tab)
  

  Jones Day (Lexology) – “China Imposes Extraterritorial Export Control Measures Over Rare Earth Items” (Oct 28, 2025)lexology.com (opens in a new tab)* CSIS – “China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense” (Oct 9, 2025)csis.org (opens in a new tab)

  
  

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