China Expands Rare Earth Export Controls Ahead of Trump-Xi Meeting: Strategic Implications for Global Technology Supply Chain

China accounts for nearly 70% of the world's rare earths mining. (File)

Hongkong:

China announced new restrictions on rare earths exports and related technologies on Thursday, expanding controls over these critical elements essential for numerous high-tech and military applications. This development comes approximately three weeks before an anticipated meeting between President Donald Trump and Chinese President Xi Jinping.

The regulations issued by the Ministry of Commerce require foreign entities to obtain special authorization to export products containing even minimal amounts of Chinese-sourced rare earth elements. These minerals are vital components in a wide range of products, including jet engines, radar systems, electric vehicles, and consumer electronics such as laptops and smartphones.

Beijing will also implement permitting requirements for exporting technologies connected to rare earths mining, smelting, recycling, and magnet production.

China dominates the global rare earths market, controlling approximately 70% of mining operations and about 90% of processing capabilities worldwide. Access to these materials represents a significant point of contention in ongoing trade negotiations between Washington and Beijing.

As Trump has increased tariffs on Chinese imports, Beijing has intensified controls on these strategically important minerals, raising concerns about potential supply shortages for manufacturers in the United States and other countries.

The implementation mechanism for these new policies in overseas markets remains unclear.

Neha Mukherjee, a rare earths analyst at Benchmark Mineral Intelligence, described the export controls as "a strategic move by China that mirror some of Washington's new chip export rules."

"Most rare earth magnet manufacturers in the U.S., Japan and elsewhere remain heavily dependent on rare earths from China, so these restrictions will force some difficult decisions — especially for any company involved in military uses of rare earths because most of those export licenses are expected to be denied," he stated.

"The message is clear: if the U.S. and its allies want supply chain security, they must build independent value chains from mine to magnet," Mukherjee emphasized.

The Commerce Ministry explained that the new restrictions aim to "better safeguard national security" and prevent uses in "sensitive fields such as the military" derived from rare earths processed or sourced from China or its related technologies.

The ministry claimed that certain unnamed "overseas bodies and individuals" had transferred rare earths elements and technologies from China abroad for military or other sensitive applications, causing "significant damage" to national security interests.

These new restrictions were announced shortly before Trump and Xi are expected to meet during the Asia-Pacific Economic Cooperation forum in South Korea, scheduled for late November.

"Rare earths will continue to be a key part of negotiations for Washington and Beijing," noted George Chen, a partner at The Asia Group. "Both sides want more stability but there will be still a lot of noises before the two leaders, President Trump and Xi, can make a final deal next year when they meet. Those noises are all negotiation tactics."

The restrictions will likely accelerate government and private investments in developing rare earth supply chains outside China. According to Mukherjee, $520 million in investments for the American rare earths industry were announced in the second quarter alone, with the majority coming from government sources.

Progress is already underway, with American magnet manufacturer Noveon recently announcing an agreement with Lynas Rare Earths to secure non-Chinese rare earth supplies from Lynas' Australian mine. Additionally, MP Materials is preparing to open a new magnet production facility in Texas, utilizing rare earths from its California mine, the only operational rare earths mine in the United States.

In July, the U.S. Defense Department committed to investing $400 million in the Las Vegas-based company, establishing price floors for key elements and guaranteeing purchase of all magnets produced at the new facility during its first decade of operation.

Wade Senti, president of U.S. permanent magnet company AML, emphasized the need for innovation: "The game of chess that China is playing underscores the importance of developing innovation that changes the game and puts the United States in leading position."

Nazak Nikakhtar, former Commerce Department undersecretary, characterized the new restrictions as "a significant development and escalation" by extending controls to related technology, equipment, and sectors like semiconductor manufacturers. "This should be a wake-up call to the U.S. government that we need to invest in and appropriate more to domestic capabilities. Both are critical to rebuild America's rare earths industrial base," she stated.

In April, Chinese authorities imposed export restrictions on seven rare earth elements shortly after Trump announced substantial tariffs on many trading partners, including China.

Despite supply uncertainties, China approved some rare earth export permits in June and indicated it was expediting its approval processes.