China and rare earths
Tensions seem to be easing over US imports of industrially essential rare earths from China. Beijing had introduced export controls, particularly targeting US defence companies, which consume immense quantities.
BERLIN/BEIJING/WASHINGTON (own report) – After weeks of Western concerns about a halt to China’s exports of rare earths that are indispensable for many advanced industrial processes, the situation is beginning to ease. Beijing introduced export controls on seven rare earth metals on 4 April in response to Trump’s fierce US tariffs on China. German industry is also affected by Beijing’s move. As it was unclear when and whether export licenses would be issued again, there was growing anxiety on the part of German companies. At the beginning of May there were reports that it was only “a matter of weeks” before the first production shutdowns would occur. But on Tuesday, it was announced that new deliveries of the required rare earths had in fact been approved. With its introduction of export controls, Beijing is mainly targeting the US arms industry, which depends on large volumes of rare earths. The current agreement between Washington and Beijing to reduce tariffs now rests upon China’s suspension of some non-tariff measures. This could include a lowering of export barriers for rare earths. Calls for Western economies to mine rare earths themselves have so far led nowhere. The main difficulty centres on excessive processing costs and major environmental damage.
China's market dominance
On April 4, defending itself against the unprecedented tariffs on its exports to the United States, China not only slapped equally high tariffs on imports from the US but also introduced export controls on seven rare earth metals. These little-known raw materials are samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. Although little-known, they are indispensable for the manufacture of many high-end products, ranging from electric motors to solar cells and semiconductors. The defence industry certainly cannot do without them. According to the Washington-based Center for Strategic and International Studies (CSIS), more than 400 kilograms of rare earths are needed to build an F-35 fighter jet, a good 2,350 kilograms to build an Arleigh Burke-class destroyer, and almost 4,200 kilograms to build a Virginia-class submarine.[1] The global market for rare earths is dominated by China. The country has a 60 percent global share in mining, 87 percent in processing and 94 percent when it comes to putting it into magnetic products.[2] In the field of what are known as heavy rare earths, which include gadolinium, terbium, dysprosium, lutetium and yttrium, the People’s Republic even holds a virtually 100 per cent global market share.
Strict export controls
With its export controls, Beijing is targeting the US arms industry in particular. In threatening to stop all supplies, China is only copying of practices that the United States has been applying for years. Washington is constantly imposing new sanctions on Chinese companies that it accuses - accurately or inaccurately - of working for China’s armed forces. Earlier Chinese export controls have proven to be ineffective with regard to deliveries to the US. For example, Beijing’s introduced export controls on gallium and germanium in July 2023,[3] so that no supplies to the US were approved over the whole of 2024. An official general ban on deliveries to the US was then imposed in December 2024. However, there has yet been no shortage of these materials in the US, a fact attributed by experts to re-exports by other Western recipients. As the Washington-based Henry L. Stimson Center found in its analysis, China’s export of germanium to the US fell by 5,900 kilograms to zero from 2023 to 2024. But over the same period germanium exports to Belgium, which has probably been reselling to the USA, rose by 6,150.[4] So Beijing is now insisting that buyers of these two rare earths provide detailed information on their usage and final destination. Customers must present technical drawings and details of sales regions.[5]
“A matter of weeks”
There was initially displeasure in the West about the meticulous submission of detailed information now required in export applications. Soon considerably greater concern spread across German industry about supplies. This was not only due to the delays caused by Chinese export controls, but above all to the question of how restrictive Beijing would in future be with its approvals. At the beginning of May, there was already talk of “production stoppages in many industries because rare earths cannot be generally replaced.” Indeed, it would only be “a matter of weeks” before stocks were completely depleted.[6] Mercedes said that the company had already set up a special task force to try to procure the rare earths. A spokesperson stated that while production was not at risk in the short term, there were hundreds of suppliers who needed rare earths for their parts manufacturing. So far, there is “no overview of which suppliers are particularly affected”. Automotive suppliers such as ZF and mechanical engineering companies such as laser specialist Trumpf have reported a similar situation.
Problems easing a little
There are currently signs of a cautious easing of industry worries. It was announced on Tuesday that at least four export licenses have now been issued. It was reported that a Volkswagen supplier had already received the first one at the end of April. Volkswagen had lobbied the Chinese authorities for this and presumably benefited from its good relations with the People's Republic.[7] However, it was unclear whether export applications had already been rejected. According to one source, only applications from Europe and Vietnam had been approved so far. After all, the existing approvals were granted before the agreement was reached with the Trump administration in the dispute over the excessive US tariffs. According to observers, this indicates that the tariff conflict will not lead to a complete halt to all exports of the seven rare earths specified. In the agreement between Washington and Beijing on the extensive lifting of bilateral tariffs on Monday, China also pledged to “take all necessary measures” to suspend or lift the “non-tariff countermeasures” imposed since 2 April.[8] Insiders firmly believe that this also applies to the de facto ban on exports of rare earths to the US. However, the agreement is initially only valid for ninety days. It is also unclear whether it also applies to US arms companies.
Core issue is reprocessing
China’s export controls have once again fuelled calls in the West, and in Germany in particular, to become independent of raw material supplies from the People’s Republic. Industry wants to avoid getting into trouble should the US or other Western powers intensify their attacks against China and inevitably trigger another sharp defensive response by Beijing. In the search for alternatives there have been repeated reports of fresh discoveries of large deposits, not least in Norway, Greenland [9] and Ukraine. The core problem behind this dependency is not actually a lack of rare earth deposits. In some cases they are by no means so rare, as experts in the raw materials industry have repeatedly pointed out. However, the process of extracting, preparing and processing them is labour-intensive, consumes huge amounts of energy, and has a hugely negative impact on the environment. This is the reason why the countries of Europe and North America have withdrawn from these activities and left it to China, which moreover now has the most sophisticated technologies in the industry. Even the US company MP Materials, the only one in the US that mines rare earths on a large scale, was recently forced to send 80 percent of its mining output to China for processing. This option was then blocked, in April, by the sudden tariff war between the United States and China.[10]
The costs
A recent article in the Financial Times argued that if Western countries really wanted to become independent in the rare earths sector they would have to “invest in processing”.[11] However, this move would drive up costs for the German industry and cause considerable environmental pollution in the West. This is why so little progress has been made so far, not least in the United States. The same problem is found in other sectors of the raw materials industry. For example, 65 per cent of global lithium production is carried out in China. Efforts to mine lithium in Europe are regularly met with determined protests from environmentalists, as seen most recently in Portugal and Serbia (german-foreign-policy.com reported [12]).
[1] Gracelin Baskaran, Meredith Schwartz: The Consequences of China’s New Rare Earths Export Restrictions. csis.org 14.04.2025.
[2] Judith Henke: Wie China sich das Monopol bei seltenen Erden sichert. handelsblatt.com 05.01.2024.
[3] See also: Chinas erster Gegenschlag and China's Second Counterstrike.
[4] Sarah Godek: China’s Germanium and Gallium Export Restrictions: Consequences for the United States. stimson.org 19.03.2025.
[5], [6] Sven Astheimer, Gustav Theile, Benjamin Wagener: Industrie bangt um kritische Rohstoffe. Frankfurter Allgemeine Zeitung 02.05.2025.
[7] Beijing has issued first rare earth magnet export permits, Volkswagen suppliers on the list. marketscreener.com 13.05.2025.
[8] Full text: Joint Statement on China-US Economic and Trade Meeting in Geneva. globaltimes.cn 12.05.2025.
[9] See also: Der Kampf um Grönland (I).
[10] Ryan McMorrow, Nian Liu: US rare earth champion faces trade war test after tariffs halt China sales. ft.com 18.04.2025.
[11] Zornitsa Todorova: If the US wants more rare earths, it needs to tackle refining. ft.com 14.05.2025.
[12] See also: Wettlauf um Lithium.
