As U.S. and Chinese negotiators meet for trade talks in London this week, a primary concern for Washington will be whether Beijing eases the flow of rare earth materials, which have become key components of modern life.
China dominates the global supply chain for rare earths, mining about 70% and refining 90% of the materials used to produce everything from wind turbines and defense equipment to electric vehicles and car seats. The United States produces virtually none of the world’s rare earths, whose extraction can be devastating for the environment.
That economic vulnerability has come into sharper focus since April, when China imposed export controls on seven strategic rare earth metals and related magnets amid an escalating trade war with President Donald Trump. Companies, especially automakers and business associations in the U.S., Europe and elsewhere have sounded the alarm, warning that China’s rare earth restrictions risk delays that could bring manufacturing to a halt.
Kevin Hassett, director of the National Economic Council, told CNBC on Monday that U.S. negotiators in London were seeking a “handshake” from China on rare earths after Trump said last week that Chinese President Xi Jinping had agreed to resume their flow in the first call between the two leaders since Trump returned to office.
“They were kind of releasing them, but it was going a lot slower than some companies believed was optimal,” Hassett said.
In an editorial Monday, the Chinese state-run news agency Xinhua said the rare earth export controls were not a “short-term bargaining chip” for trade talks but a responsible policy aimed at preventing rare earths, which have both civilian and military uses, “from being used in activities that threaten international peace and security.”
“Imposing export controls on strategic resources with clear dual-use characteristics is a common international practice and a legitimate right of sovereign nations to safeguard their own security,” the editorial said.
Signs of hope have appeared in recent days. On Saturday, the Chinese Commerce Ministry said it was open to talks on rare earth export controls, and that it “fully considers the legitimate needs and concerns of other countries.”
“China has already approved a certain number of compliant applications and will continue to strengthen the approval process for compliant applications,” it said in a statement.
Despite Beijing’s offer of dialogue, experts say China is unlikely to completely remove the restrictions and is “flexing its muscles.”
That was clear to members of the foreign business community in China who have attended briefings on the subject with Commerce Ministry officials.
“While we clearly conveyed that we are at an immediate risk of supply chain disruption, we didn’t have the impression from the Chinese side that they want to resolve this with as much urgency,” an automotive industry official involved in the discussions told NBC News last week.
The European Union’s Chamber of Commerce in Beijing said Friday that while there has been “some improvement in the situation,” the reprieve has not been enough to “prevent severe supply chain disruptions.”
A handful of European companies have received some approvals, said Jens Eskelund, president of the European Union Chamber of Commerce in China. But “it is not sufficient to solve those problems completely or avoid disruption in the supply chain,” he said in emailed comments.
At the core is a Chinese licensing system that requires export applications for the designated materials to undergo a vetting process that manufacturers say is painstakingly slow and results in only a fraction of approvals.
“The fix we are working on is to make the approval process smoother,” said the automotive industry official, who asked not to be identified because they were not authorized to comment on the sensitive discussions.
Why China dominates rare earths
Rare earths are a group of 17 elements in the middle of the periodic table, including neodymium, cerium and scandium.
What makes them special is the magnetic quality provided by their atomic structure, which makes them more powerful than standard iron magnets and ideal for use in the motors, sensors and actuators found in car seats, MRI machines and disk drives.
Contrary to what their name suggests, rare earths are present in abundant quantities in the earth’s crust. But their structure also means that wherever they naturally occur, they are usually mixed with other elements, often radioactive ones, and extracting them is a toxic, environmentally harmful and expensive process. It’s also a process that comes with thin profit margins and massive upfront investment.
Until the 1980s, the global rare earths industry was dominated by the United States. But that changed as China ramped up its rare earth operations, supported by government subsidies.
“As far back as the late 1980s, Chinese leaders understood how valuable rare earths could be,” said Patrik Andersson, an analyst at the Swedish National China Centre at the Swedish Institute of International Affairs.
The U.S. and Europe were gradually pushed out as China’s lower labor costs, weaker environmental standards and robust government backing helped its companies become the dominant force in rare earths.
“China doesn’t just mine rare earth materials. They refine them and manufacture the magnets as well. So in fact, the closer you get to the final industrial use, the more dominant China becomes,” Andersson said.
Demand for rare earths has only increased as the automobile and electronics industries advanced in recent decades and began their clean energy transitions.
That has given China “real leverage, not just economically, but geopolitically too,” Andersson said. “They can influence global prices, supply availability, and really even the pace of green tech development.”
How China is using that leverage
China has long signaled its willingness to leverage its dominance in rare earths and the broader group of critical minerals, temporarily banning rare earths exports to Japan in 2010 over a territorial dispute.
Since 2023, it has also imposed export curbs on gallium, germanium, antimony, graphite, and tungsten, which are critical minerals but not rare earths. Also in 2023, Beijing banned the export of technology to extract and separate rare earths.
Export restrictions are not uncommon and countries around the world often impose them on products and materials they consider key for national security. The U.S., for example, has levied curbs on the export of its semiconductors to China in an attempt to slow Beijing’s artificial intelligence advancements.
China has also introduced a licensing system requiring exporters to provide documents proving that the end products will not be used for military purposes, which can be difficult.
“This whole mechanism is such that it gives China visibility into where the minerals are going, who’s using them and for what,” said John Seaman, a research fellow at the French Institute of International Relations. “It allows China to sort of map the supply chain and map the usage, and therefore also map the vulnerabilities of countries.”
Experts also say that in the long term, the situation could give Chinese manufacturers an edge.
“The alternative is then to basically rely on Chinese-made technology. So you’re not going to get your rare earth magnet, but you’re going to get a Chinese wind turbine,” Seaman said.
