Introduction to Rare Earth
What are rare earths?
Rare earth elements are a group of 17 elements that are more abundant than gold and are found in many countries, including the United States.
Why are rare earths important?
Magnets made from rare earths can be used to create smaller, more efficient electric motors and generators in smartphones, cars and jet engines, and MRI machines. They are also a vital component of a range of larger weapons, from the F-35 stealth fighter to nuclear-powered attack submarines.
Where is the difficulty?
The extraction and processing of rare earth minerals are difficult, the refining technology threshold is high, the cost is high, and it pollutes the environment.
China’s role
The world’s largest reserves
China is the country with the largest reserves of rare earth minerals, but rare earth minerals are not only found in China. The Bayan Obo Mining District in Baotou City, Inner Mongolia, China, which means “rich sacred mountain”, has become the “hometown of rare earths” because of its rich reserves, which account for 90% of the country’s total rare earth reserves and nearly 40% of the world’s proven rare earth reserves.
Have a complete supply chain
The reason why China can monopolize rare earths is that, in addition to having the largest reserves in the world, another key factor is that China is the only technology supplier in the world that possesses complete rare earth mineral mining and refining technologies, and has a complete supply chain for the rare earth industry. Establishing a supply chain for the rare earth industry is not as easy as most people imagine!
Because of this, rare earth minerals produced in many countries around the world can only be shipped to China for refining and production after being mined.
Development of China’s rare earth industry
China started rare earth mining very early, in the 1950s, but the industry really began to develop in the late 1970s. At the time, China combined low labor costs and relatively lax environmental standards with the adoption of foreign technology.
Most of the technologies that China introduced in those years were developed in the United States, Japan or Europe. However, with the passage of time, China’s labor costs are no longer an advantage.
The reason they can continue to control this industry is mainly because they have made significant improvements in the integration of the entire rare earth industry chain and processing and refining technologies. They are no longer the Wuxia Amon of the past.
China is the monopoly holder of rare earths
China begins restricting exports
Fight back against US’s 145% reciprocal tariff
On April 4, 2025, after years of veiled warnings and countering U.S. reciprocal tariffs the day before, the Chinese government imposed export restrictions on seven rare earth minerals in retaliation for Trump’s initial 145% reciprocal tariffs on Chinese goods. All Chinese companies must obtain government permission to export the seven minerals and related products such as magnets.
Other countries use China’s Rare Earth prohibited from exporting to US
On April 22, 2025, South Korea’s Korea Economic Daily reported that sources from the South Korean government and business community revealed that Beijing recently asked South Korean industry not to export products containing rare earth minerals from mainland China to US defense companies, otherwise they may face Chinese sanctions.
China’s Ministry of Commerce recently sent letters to a number of South Korean companies, clearly expressing the above requirements. If South Korean companies violate the export restrictions, they may face sanctions. These companies have a wide range of products, including power transformers, batteries, displays, electric vehicles, aerospace equipment, medical equipment, etc. Rare earth minerals are key raw materials for these products.
Industry insiders revealed to the Korea Economic Daily that transformer manufacturer Company A has received an official document from the Ministry of Commerce of China, requiring Company A to “guarantee that it will not export transformers and other electrical equipment, equipment and products containing Chinese rare earth elements to the U.S. defense industry and the U.S. military” and “please note that any violations may result in sanctions.” It is said that another transformer manufacturer, Company B, also received a similar letter.
The specific details of the sanctions have not yet been announced, but the industry believes that China may take the measure of “stopping the sale of rare earths.” A government official said, “It appears that China has begun to fully control the export of all strategic minerals to third countries.”
Severe damage to the industry
These seven rare earths are extremely important for electric vehicles, wind turbines, and fighter jets. China’s latest export controls target medium and heavy rare earth elements, such as dysprosium, zirconium and samarium, which enable high-performance magnets to withstand high temperatures. These rare earths have important military uses and are used in jets, missiles and drones. They are also used in large quantities in rotating parts, motors and transmissions of electric and hybrid vehicles. They have also forced the development of the United States’ sixth-generation stealth fighter to be delayed.
Government officials, traders and auto industry executives estimate that current rare earth stocks can only support three to six months, and companies will compete to stockpile more rare earths and find alternative sources of supply to avoid major disruptions.
Exports may be tightened in the future
“Light” rare earths such as neodymium and ferromagnetic metals, which are used in large quantities in magnets, are not on China’s current list of restricted exports. If the trade war intensifies, China has the leverage to threaten to increase restrictions.
Oil and rare earth are key materials
Arab countries use oil to fight against the US
Fifty years ago, in order to protest against Western countries’ repeated favoritism towards Israel in the Middle East Arab War, Middle Eastern countries repeatedly used oil bans as bargaining chips. It was indeed effective, causing global oil shortages and soaring oil prices, pushing up global prices and triggering several global inflation crises in the last century.
China learned from oil ban
China’s leaders at the time learned from the oil bans adopted by Middle Eastern countries to counter the United States. In 1992, while visiting Inner Mongolia, one of China’s main rare earth production centers, former Chinese leader Deng Xiaoping, who led China’s economic reforms, made his famous statement:
Statement: “The Middle East has oil, and China has rare earths.” Today, China has realized Deng Xiaoping’s vision and dominates the entire rare earth supply chain.
More than half a century has passed, and oil is facing a greater threat from various green energy sources and is accused of being the main culprit of global warming. Compared with the declining importance of oil (but I want to emphasize that oil is still very important at present), the increasing importance of rare earths; and the substantial increase in China’s national strength, coupled with the fact that Western countries have used all means to suppress China’s rise and have used unreasonable means in various aspects to try to block the rise of China’s national strength, further highlighting the important position of China’s possession of rare earths.
China use rare earth as weapon
China’s trade war with Japan
In 2010, due to territorial disputes, China regarded the export of rare earths to Japan as a weapon. China regulated the export of rare earths to Japan and suspended the export for nearly two months, leaving Japan no room to fight back.
At the time, Japan was confidently carrying out extensive internal and external propaganda, stating its ability to find alternative suppliers, its dream of recycling rare earths, and its claim to have found a huge rare earth mine on the bottom of the Pacific Ocean to appease Japanese companies. However, these measures are totally unfeasible and cannot stand the test of facts. Soon after, major Japanese trading companies turned around and forced the Japanese government to seek China to resume rare earth exports to Japan.
Ultimate weapon to US’s reciprocal tariff war
In the trade war initiated by Trump’s second term, which was mainly aimed at China, the United States has repeatedly increased its tariff rates on China. China is the only country in the world that has repeatedly fought back against the US tariff increases and is not afraid of the US’s unreasonable oppression.
One of the major weapons used is that the United States still relies “extremely” on China’s rare earths. China has realized that the United States has no alternative options at all and will have to come back to China sooner or later. The increase in China’s tariff rate is simply impossible to achieve and will not last long.
The West is powerless to fight back
For decades, the United States and other countries have relied on Beijing for supplies of these processed metals. In fact, it is not as the Western media claims. More than half a century has passed since Western countries’ monopoly on China’s rare earths, and there is still no countermeasure. If there was any, they would have come up with it long ago.
Apart from China, where can the United States buy rare earth resources that are extremely important for industry and military? It takes nearly 30 years to obtain a license to mine and operate rare earth mines in the United States, and it is not easy to find alternatives.
The United States, the biggest victim and the one that has been most aggressive in suppressing China, has almost no room to take equal retaliatory measures. According to a 2025 report by the United States Geological Survey, the United States will rely on China for 70% of its rare earth compound and metal imports between 2020 and 2023.
The world is beginning to be severely affected
Reuters exclusively reported on May 30, 2025 that global automotive industry executives have warned that the rare earth magnets stored in mainland China are about to be in short supply, which may cause auto factories to stop production and close within weeks. Such magnets are needed in various automotive devices such as car wiper motors and anti-brake lock sensors.
After China introduced a rare earth tracking system to strictly control exports, Suzuki Swift model production was suspended due to parts shortage, and some European parts manufacturers closed their factories.
U.S.
The Alliance for Automotive Innovation, a trade group representing General Motors, Toyota, Volkswagen, Hyundai and other major automakers, wrote in an unpublished letter to Trump administration officials on May 9: “Without stable access to these parts and magnets, automotive suppliers will not be able to produce key auto parts, including automatic transmissions, throttle systems, alternators, various motors, sensors, seat belts, horns, lights, motors, power-assisted steering and cameras.” The letter also pointed out that without these necessary auto parts, it is only a matter of time before the operation of American auto factories is interrupted. The organization also said: “In the most serious cases, it may be necessary to reduce production or even shut down auto assembly lines.”
When Trump and U.S. Treasury Secretary Bennett saw the petition from the auto industry, they felt that something was wrong and immediately scolded China at a press conference, demanding that China immediately start exporting rare earths. Trump also unilaterally declared that he wanted to call Xi Jinping to resolve the matter.
Europe
The European Association of Automotive Suppliers (CLEPA) said that due to the shortage of rare earths caused by the mainland’s export restrictions, many European automotive supplier factories and production lines have been closed. At the same time, some US media quoted informed sources as saying that some automakers and their suppliers are considering moving some auto parts production to the mainland.
Germany
The German Association of the Automotive Industry (VDA) warned on June 3 that China’s control on rare earth exports could put the German automotive industry at risk of production disruptions, becoming the latest industry group to warn of a supply chain crisis.
India
The Society of Indian Automobile Manufacturers (SIAM) said last week that the country’s auto parts manufacturers’ stocks of rare earth magnets are expected to be exhausted by the end of May, “and production in the Indian automotive industry is expected to stagnate from the end of May or early June.”
China’s rare earth exports to the United States plummeted by 68% in April, with only 19 export licenses approved. This seemingly “precision strike” against the United States unexpectedly strangled India’s throat. An emergency report from the All India Automobile Manufacturers Association (SIAM) pointed out that the entire industry’s rare earth magnet inventory will be exhausted within 72 hours, and the production line of 6 million electric vehicles will become a “high-end toy”. The purity of India’s domestic magnets is only 97%, while Chinese products have reached 99.999%, which directly affects the endurance and safety of electric vehicles. 98% of the country’s magnets rely on China, and the local smelting capacity is less than one twenty-seventh of China’s.
The delegation of the Indian Automobile Association flew to Beijing secretly on May 1. The Modi government packaged this trip as “supply chain cooperation”, but it actually concealed a signal for help from China’s rare earths. But China will ask India to solve the cases of Shanghai Electric’s loss of 2.3 billion yuan in India, Xiaomi’s assets were frozen, and SAIC was forced to hand over control, which are cases of India’s “de-Sinicization”. The Indian government has adopted an anti-China strategy of requiring Chinese companies to share patents but prohibiting technology transfer, and to engage in joint production but restricting management rights on the grounds of “national security.”
Japan and South Korea
Bloomberg said that Japanese and Korean battery and semiconductor manufacturers are also extremely dependent on China’s rare earth supply. If China cuts off the rare earth supply of these US allies, US companies may face greater pain.
China’s next regulation will be more deadly
Light rare earths have not been regulated yet
China still has bargaining chips but has not used them. So far, China’s restrictions have mainly targeted medium and heavy rare earths, which are mainly concentrated in the defense field, but if China also restricts light rare earth elements such as neodymium and ytterbium, this may deal a greater blow to the US economy because these light rare earths are more widely used in consumer products.
Neil Thomas, a researcher at the China Analysis Center of the Asia Society Policy Institute, said that China’s control of rare earths is a warning for further escalation of the situation, but if the US-China situation deteriorates, China may then begin to deal a real blow to the US defense supply chain.
US needs 10 or more years to get rid of
Although the United States can cooperate with Australia’s Lynas Rare Earths, the largest rare earth producer outside of China, and rare earth production capacity is also under construction in Brazil, South Africa, Japan and Vietnam, none of them can immediately provide solutions for US companies.
In addition, previous analysis also pointed out that the United States lags behind China in heavy rare earth separation and purification technology by 20 years. Even if the United States tries to get rid of its dependence on the mainland through “mineral diplomacy” and other means, it will be difficult to shake China’s position in the short term.
Cory Combs, deputy director of Trivium China, a consultancy, said that China’s influence is more lasting than that of the United States at this stage. It will take 10 years for the United States to get rid of its dependence on China’s rare earths. Chinese companies have developed effective alternatives to most American chips. China is making progress in this confrontation.
Top rare earth listed companies
The following table shows the top rare earth listed companies around the world:
| Ticker | Company name | Country |
| SSE: 600111 | China Northern Rare Earth | China |
| SSE: 600392 | Shenghe Resources | China |
| MP | MP Materials Corp | US |
| UUUU | Energy Fuels | Canada |
| TSX: AVL | Avalon Advanced Materials | Canada |
| ASX: LYC | Lynas Rare Earths | Australia |
| ASX: ILU | Iluka Resources | Australia |
| ASX: ARU | Arafura Rare Earths | Australia |
Closing words
According to reports from the Wall Street Journal, informed sources revealed that several traditional and electric vehicle manufacturers and their suppliers are considering transferring the production of some auto parts to mainland China to avoid the upcoming factory shutdown crisis. The US’s reciprocal tariff war now seems to be counterproductive. China’s mere rare earth export control has become an ironic result of Trump’s goal of launching a trade war to “bring manufacturing back to the United States.”
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