Highlights
- China controls 70% of global rare earth mining and 90% of global refining.
- China implements export restrictions that significantly impact US automotive and tech industries.
- Export controls on seven critical rare earth elements have caused production slowdowns.
- There has been a 93.3% year-to-year drop in rare earth magnet shipments to the US.
- US and global businesses are urgently seeking diversification strategies.
- Strategies include domestic mining, international partnerships, and innovative recycling technologies to reduce dependence on Chinese rare earth supplies.
During April 2025, China implemented export restrictions on vital rare earth elements that have actual real-world consequences for American businesses and consumers. These restrictions are not just an abstract economic exercise but are rather a clear and present problem for American businesses that rely on foreign materials for high-tech products that we utilize. These restrictions immediately impact business operations, threaten the organization’s survival, and ultimately pass on higher costs directly to the American consumer. The unpredictable nature of these restrictions demands immediate action, forcing businesses to seek alternatives and to safeguard their supply chain now rather than waiting for the next unforeseen crisis.
American businesses desire operational stability, and consumers desire predictable and consistent prices for the cars and electronics that underpin our modern quality of life. China’s sudden export controls, however, are pushing companies into the unenviable position of either locating more of their manufacturing in China – risking intellectual property theft and further putting themselves at the mercy of unpredictable controls – or finding new sources of rare earths elsewhere in the world at a higher cost.
Despite their name, rare earth elements are not actually that rare in the Earth’s crust. However, they are rarely found in concentrations high enough to be economically viable for mining. These 17 metallic elements are essential ingredients in countless high-tech products that we use daily. High-performance technology like smartphones, electric cars, laptops, and even MRI machines are built using by rare earths. These materials are crucial for everything from the colors in our TV screens to the efficient motors in electric vehicles and even the precision systems that enable the US military to “put warheads on foreheads” without the added destruction of previous generations of bombs.
China’s dominance in the rare earth supply chain is unparalleled. For decades, through deliberate industrial policy, China has cultivated a near-monopoly, controlling about 70% of global rare earth mining and an overwhelming 90% of the world’s refining capacity. This means that for many critical rare earths, viable alternatives outside of China are severely limited and often come with substantial cost or quality disadvantages.
During April 2025, China introduced sudden and stringent new export controls targeting seven specific medium- and heavy-rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. Critically, these rules also include high-performance magnets made from these elements, like those found in electric vehicles and wind turbines. Instead of an outright ban, China implemented a sophisticated licensing system that makes it more difficult and time-consuming for foreign companies to obtain these vital materials. This effectively acts as a throttle on supply, enabling Beijing to exert granular control over the quantities and destinations of these seven highly sought-after materials. A staggering 93.3% year-to-year drop in rare earth magnet shipments from China to the United States was recorded in May 2025.
The real-world impact of these controls is already being felt.
On Your Driveway
The automotive sector is acutely vulnerable. Rare earths are vital for electric motors, sensors, and even components in traditional combustion engine cars. Electric vehicles, more specifically, typically require 6-11lbs of rare earth magnets. Shortages have already led to significant production slowdowns and even pauses. Ford Motor Co. temporarily shut down its Ford Explorer plant for a week in May 2025 due to rare earth supply chain issues. The European Association of Automotive Suppliers even confirmed that several European parts manufacturers have already halted production. Japanese automakers Nissan and Suzuki Motor have also reported supply disruptions, showing that this is a global issue, not just an American issue. All of these slowdowns both within US supply chains and among our close trading partners will mean longer waiting times for new cars and even higher prices at a time when consumers are vulnerable economically.
In Your Pocket
The consumer electronics sector, encompassing everything from smartphones to laptops and advanced AI infrastructure, is similarly impacted. Rare earths are critical for semiconductor manufacturing, high-performance motors, batteries, and cooling systems. Analysts anticipate that if export restrictions remain in force or tightened through 2025-2026, companies that have not diversified away from Chinese sources will face production slowdowns, higher production costs, and potential product launch delays. The broad dependency of our digital lives on these materials from a single, hostile, source underscores the urgency of this problem for everyday Americans.
So, why has China hit foreign companies with these export restrictions? While China’s formally cites national security concerns, resource conservation, and environmental protection, the timing and impact of these export restrictions strongly suggests retaliatory measures. These controls closely followed increased US tariffs on Chinese electric vehicles and technology, as well as earlier US restrictions on China’s access to advanced semiconductors. This is part of a broader, escalating economic competition, aimed at compelling foreign companies to either relocate manufacturing to China or invest heavily in developing entirely new, costly supply chains outside of China. It is a deliberate strategy to solidify China’s position as a high-tech manufacturing hub and increase its geopolitical leverage.
In response, Western nations are pushing for solutions, recognizing the urgent need for action.
Diversification
The United States and European Union are accelerating efforts to reduce their reliance on China. This includes investing in domestic mining and processing facilities, like MP Materials’ expansion at Mountain Pass in California. The EU’s Critical Raw Materials Act is setting ambitious targets for domestic extraction, processing, and recycling of strategic materials. International partnerships, such as a US-Saudi collaboration for a refining hub or funding for projects in Greenland, are also crucial to unlocking new sources and establishing processing and manufacturing hubs outside of China. These efforts are aimed at providing American businesses with stable, alternative suppliers.
Recycling
A promising and sustainable solution is the recycling of rare earth materials from old electronics. Companies are pioneering innovative processes, including AI-driven sorting systems and methods to directly recycle magnets without complete rare earth separation. Apple, for example, uses robots specifically designed to recover rare earth magnets from decommissioned devices. This not only builds domestic capacity faster but also mitigates the environmental impacts associated with traditional mining, offering a more predictable and domestically controlled supply.
Ultimately, while the recent US-China trade agreement framework offers a temporary easing of some rare earth export restrictions, it is not a definitive resolution. Its limited scope, particularly the exclusion of military-grade rare earths and the temporary nature of eased licenses, highlights continued structural vulnerabilities – meaning that American businesses that buy inputs from China are constantly at risk of having their supplies cutoff. This means that lasting solutions require sustained effort from US firms and even the government to diversify rare earth supply chains away from China.
For American consumers, this shift means recognizing the hidden dependencies in our everyday products. There is an urgency to achieve supply chain resilience, even if its impacts seem far away. The era of cheap, easily accessible rare earths from a single dominant source is over, which also means an end to our cheap, abundant selection of high-end electronics. Now, businesses and governments must take proactive steps to secure a stable and predictable supply of rare earths, ensuring that everyday Americans continue to benefit from the innovation and affordability that are cornerstones of American ingenuity and contribute to our quality of life.
While the US government makes these long-term investments in domestic REE production and processing, negotiate trade and investment deals, and put forth lengthy initiatives, American businesses and consumers will need to get ahead of the challenges to come. Navigating supply shortages and price hikes means first understanding the REE industry and the US-China relationship. With this understanding, American firms will have to re-evaluate how they view success. I advocate for putting the American consumer and society first, questioning what strategic moves will make people best-off not just in the short-term but in the long-term as well: this will include seeking alternative REE suppliers outside of China, reducing the amount of REEs used in cars, technology, and daily products, and explaining their business decisions to the American public at a time when people are looking for real answers to problems like the higher cost of living. American consumers, with this knowledge, will need to understand that the era of cheap, disposable technology is coming to an end and to adjust expectations around new product releases, smart features, and even our relationship with our “outdated” devices. This collective effort, from corporate strategy shifts to individual consumer awareness, will be crucial in building a resilient and sustainable future.
For a more comprehensive analysis and in-depth data on the critical issues discussed in this article, please refer to the full case study: “China’s Rare Earth Export Controls” by Ian Murphy, available at https://rareearthexchanges.com/news/chinas-rare-earth-export-controls-by-ian-murphy/.
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