Highlights
- China has imposed near-total shutdown of rare earth element exports in response to Trump’s 145% tariffs.
- This has caused major disruptions in U.S. manufacturing.
- Ford and Boeing are experiencing operational paralysis due to magnet and material supply chain interruptions.
- There is a potential GDP contraction of up to 0.9%.
- Emergency trade negotiations in London aim to resolve the crisis.
- The situation highlights U.S. dependence on Chinese rare earth imports.
- The crisis underscores the need for a comprehensive industrial policy in the U.S.
Trump Administration scrambles as Ford,Boeing falter under supply chain strain. As reported by The New York Times’ (opens in a new tab) Ana Swanson, U.S. and Chinese officials are locked in emergency trade negotiations in London this week, seeking to reverse an accelerating crisis triggered by President Donald Trump’s sweeping April 2 tariffs and China’s subsequent retaliation: a near-total shutdown of rare earth element (REE) exports. Rare Earth Exchanges (REEx), this media, has warned the Trump administration since his inauguration as to the impending crises associated with near monopolized REE supply chains. The talks, led by Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, come as American industrial giants like Ford and Boeing face operational paralysis due to disrupted magnet and materials supply.
Reports (opens in a new tab) so far today are that the talks are going well.
In the NYT piece today, Swanson details how Trump’s escalation to 145% tariffs was met by Beijing with a licensing chokehold on REE exports, notably shutting down shipments of samarium, neodymium, and dysprosium—materials essential to EV motors, missile systems, and semiconductor production. Did the Trump administration not think Beijing would pull the trigger with this geopolitical as well as economic weapon?
Despite a short-lived truce agreed in Geneva last month, U.S. factories remain starved of rare earth inputs. Ford’s Chicago EV plant shut down in late May, as reported by REEx. The Chinese side, led by Vice Premier He Lifeng, is signaling limited flexibility, offering possible acceleration of export licenses to Europe but not the U.S. REEx has reported that Beijing has tightened licensing to send a message reinforcing its leverage. Perhaps the talks yesterday and today can help thaw the relations—that’s the hope.
Ongoing REEx investigation reveals deeper, more damaging fallout. Following Beijing’s export shutdown, only five export licenses have been issued globally as of June 7, three of which were secured by U.S. defense-linked firms under high-level diplomatic pressure.
REE magnet prices spiked 27% in May, and sources suggested to REEx the possibility of a leaked Pentagon memo warning of “direct operational risks” to classified weapons programs. But REEx has not been able to verify this claim.
HSBC economists estimate that these disruptions could shave 0.6% off U.S. GDP by Q3, while Oxford Economics predicts a contraction of up to 0.9% by year-end if no deal is reached.
Challenges
Unfortunately, while no doubt Liberation Day was inspired by bringing industry and investment back onshore to America, Trump’s tariffs exposed, rather than reduced, the U.S. dependence on Chinese REEs. Nearly 98% of U.S. dysprosium and 78% of neodymium are imported from China.
The U.S. “Geneva reset” was undermined within 48 hours by expanded Huawei chip controls from the Commerce Department, prompting Beijing to restrict the issuance of licenses further. This, of course, has led to this latest round of talks in London. And REEx likely learned that the U.S. delegation pursued the interaction, as was the case in the first talks in Switzerland.
China’s Ministry of Commerce framed the licensing regime as a strategic policy shift, not just a retaliatory tool, moving the battlefield from tariffs to export control boards in Baotou and Shanghai. Yet China’s use of rare earth is clearly weaponized, meant to ensure the playing field remains one-sided, as this media chronicles all the time.
Final Thoughts
Trump’s tariff blitz has evolved into an asymmetric economic standoff, with Beijing utilizing its licensing bureaucracy as a geopolitical weapon. Despite last-ditch diplomacy in London, the Biden-era vacuum in U.S. rare earth industrial policy remains unfilled. To President Trump’s credit, he has issued a couple of executive orders on the matter, including a 232 Action. Yet, REEx has consistently articulated the need for a comprehensive critical mineral (including REE) industrial policy—from mine to magnet, including education and workforce development, as well as supporting the supply chain with substantial government financial backing.
As magnet shortages ripple across aerospace, automotive, and defense sectors, the message seems clear. When it comes to REE-related products, China appears to be taking at least some retaliatory measures by simply not shipping the product. Without a credible U.S. REE strategy—as REEx argues is needed for industrial policy —Washington risks more than a recession. Even if the talks go well today and China loosens up the REE controls, this squeeze could happen again.
A key problem few want to address. That the mid-terms are around the corner and fast wins are what move the needle in Washington DC, not long-term planning as China operates.
Sources: Ana Swanson, The New York Times (June 10, 2025); REEx Investigative Desk (June 2025)
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