As the trade war between the US and China escalates, Beijing has suspended the export of several critical rare earth elements, metals and magnets, threatening to choke off supplies to the West of components central to weapons, electronics, automakers, aerospace manufacturers, semiconductor companies and a wide range of consumer goods.
The Chinese government is drafting a new regulatory system for exports, and while the policies are being framed, the shipments of the magnets, essential for the manufacturing of almost everything ranging from cars to missiles, have been halted at many Chinese ports, according to a report by The New York Times.
Per the report, once the new regulatory system is in place, it could permanently prevent supplies from reaching certain companies, including American military contractors.
The official crackdown on exports is part of Beijing’s retaliation against US President Trump’s punishing trade war. China produces around 90 per cent of the world’s rare earths, a group of 17 elements used across the defense, electric vehicle, energy and electronics industries. Seven categories of medium and heavy rare earths, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium-related items, have been placed on the export control list. The United States has only one rare earths mine, and most of its supply comes from China.
Beijing placed export restrictions on rare earth elements on April 2 as part of a broader package of tariffs and company restrictions in retaliation for Trump’s decision to hike tariffs against most Chinese products to 54 per cent. The export curbs include not only mined minerals but permanent magnets and other finished products that will be difficult to replace, analysts said.
The move, which Beijing had long hinted was possible, further ratchets up trade tensions between the world’s two largest economies and leaves American manufacturers scrambling for fresh supplies of the critical minerals they have relied upon for decades.
Now, metals and special magnets made with them can only be shipped out of China with special export licenses, the NYT report said.
However, Beijing’s system to issue these licenses is barely in place, which is causing consternation among industry executives that the process could drag on and that current supplies of minerals and products outside of China could run low.
The move, which affects exports to all countries, not just the US, is the latest demonstration of China’s ability to weaponize its dominance over the mining and processing of the critical minerals.
While the export controls stop short of an outright ban, Beijing can throttle shipments by restricting the number of export licenses it issues. Lockheed Martin, Tesla and Apple are among the US companies that use Chinese rare earths in their supply chains.
The US government has stockpiles of some rare earths, but not enough to supply its defense contractors in perpetuity.
Beijing has already imposed outright bans on the export of three metals to the US and slapped export controls on many others.
The moves to restrict heavy rare earths are especially important because China has even tighter control over these elements, David Merriman at consultancy Project Blue, told Reuters.
“There is currently only one HREE (heavy rare earth element) focused operation outside of China, Myanmar and Laos,” he said, adding that China has close involvement in supply chains from Myanmar and Laos.
Why Rare Metals Are Important For The US
The heavy rare earth metals put under export suspension by China are used in magnets– essential for many kinds of electric motors used in the manufacturing of electric cars, drones, robots, missiles and spacecraft and gasoline-powered cars.
These metals are required for the manufacturing of jet engines, lasers, car headlights and certain spark plugs and capacitors, which are electrical components of the computer chips that power artificial intelligence servers and smartphones.
