On April 4, China’s Ministry of Commerce imposed export controls on seven rare earth elements in response to President Donald Trump’s tariffs on Chinese goods. On May 11, U.S. and Chinese officials met in Switzerland and reached a 90-day tariff truce, which included removing U.S. companies from China’s trade blacklist—allowing them renewed access to rare earth supplies. Despite the agreement, the situation remained unstable, as U.S. manufacturers began shutting down operations due to rare earth shortages. Following the Geneva talks, President Trump accused China of reneging on the deal. While China did not officially withdraw from the agreement, it delayed issuing export licenses, effectively using the bureaucratic slowdown as leverage to bring the United States back to the negotiating table.
On June 11, U.S. and Chinese officials finalized a new trade framework following two days of negotiations in London, which included U.S. Secretary of the Treasury Scott Bessent. According to President Trump, the agreement includes a commitment from Beijing to resume exports of rare earth elements and magnets to the United States, following two months of severe export restrictions that disrupted key inputs for the automotive, robotics, and defense sectors. The centrality of rare earth export restrictions to the trade deal underscores the criticality of minerals to the U.S. economy as well as the severity of the chokehold Beijing holds on global supply chains.
Q1: What is the impact of China’s rare earth export restrictions on U.S. and European industry?
A1: While hundreds of export license applications have been submitted to Chinese authorities since April, after the export licensing restrictions went into effect, only an estimated 25 percent have been approved. The delay in issuing export licenses had a significant impact on U.S., European, and Japanese companies, particularly auto manufacturers, who rely on rare earths for manufacturing both internal combustion engines and electric vehicles. The restricted minerals are essential to a wide range of automotive components, such as automatic transmissions, throttle bodies, alternators, electric motors, sensors, seat belts, speakers, lighting systems, power steering units, and cameras.
Several automakers have reported supply disruptions and production pauses. Ford shut down production of the Ford Explorer at its Chicago plant for a week in May due to a rare-earth shortage. The European Association of Automotive Suppliers raised alarm last week that several European auto supplier plants and production lines were shut down due to export controls. Japanese automakers Nissan and Suzuki Motor have reported supply disruptions due to China’s rare earth restrictions as well, with Suzuki suspending production of its Swift car.
Even German automakers with extensive partnerships with Chinese battery manufacturers are beginning to report supply bottlenecks. Volkswagen originally reported it was not experiencing shortages, and its suppliers had secured a limited number of export licenses. Mercedes-Benz relayed no “direct restrictions,” but at the same time, implemented plans to stockpile key components. According to Chinese customs data, shipments of rare earth magnets to Germany fell 50 percent from March to April. The CEO of German magnet manufacturer Magnosphere shared that automakers are desperate for supplies, warning their factories could be idle by mid-July without an additional supply of rare earth magnets.
Q2: How has the Trump administration responded to China’s chokehold on rare earth elements and magnets?
A2: After export licenses stalled, President Trump accused Beijing of violating the agreement reached in Geneva on May 11. In response, Secretary of State Marco Rubio announced on May 28 that it would begin “aggressively” revoking visas for Chinese students. While it remained unclear how many of the 280,000 Chinese students studying in the United States would be affected, the administration planned to target those with Chinese Communist Party connections or studying in critical fields. On the same day, President Trump also directed U.S. companies that provide semiconductor design software to cease sales to Chinese entities, marking the latest effort to hinder China’s ability to develop advanced chips.
Q3: Top U.S. and Chinese officials have reportedly reached a deal to restore U.S. access to Chinese rare earth elements—what are the terms?
A3: Chinese and U.S. officials have confirmed that they have agreed on a new trade framework. According to reports, in exchange for China supplying the United States “up front” with rare earths and permanent magnets, the deal permits the United States to impose a 55 percent tariff on Chinese imports, consisting of a 10 percent base “reciprocal” tariff, an additional 20 percent tariff tied to fentanyl trafficking, and a 25 percent tariff that incorporates existing duties. China would apply a 10 percent tariff on U.S. imports. Additionally, in a sharp pivot from last week’s announcement by Rubio, the United States will allow Chinese students into its colleges and universities.
Q4: Is this agreement likely to solve the rare earths crisis?
A4: The Trump administration is optimistic that U.S. automakers and suppliers will regain access to rare earth minerals and magnet supply chains once the deal is finalized. While the agreement may resume the flow of heavy rare earths to Western consumers, the instability of U.S.-China relations, especially trade relations, means that the truce is likely to be only temporary. President Trump’s tariff policy has continuously evolved, and China has increased its weaponization of various minerals over the last two years, including restrictions on gallium, germanium, graphite, antimony, tungsten, and rare earths. The only long-term solution to the rare earths crisis is to build alternative supply chains that reduce dependence on China. This will include building and expanding domestic rare earth mining, refining, and magnet manufacturing capacity for both light and heavy rare earths, as well as working with international partners to unlock new deposits and establish processing and manufacturing hubs.
Until these alternate supply chains are developed, China will retain its leverage, which poses a significant risk to the U.S. economy.
Q5: How is the United States accelerating efforts to reduce reliance on Chinese heavy rare earths?
A5: Rare earth elements have been a cornerstone of the Trump administration’s domestic and international policy agenda. President Trump has integrated them into key foreign policy discussions, including those involving Ukraine, Greenland, and Saudi Arabia. His first state visit to Saudi Arabia resulted in the signing of a memorandum of cooperation on critical minerals, alongside a memorandum of understanding between U.S.-based MP Materials and Saudi Arabia’s Ma’aden to advance a complete mine-to-magnet rare earth supply chain.
Australia will be an important ally in reducing reliance on China. Australia is currently the world’s fourth-largest producer of rare earth elements and is actively expanding its domestic processing capabilities. Among the key projects is Iluka Resources’ Eneabba Rare Earths Refinery in Western Australia, supported by a $1.25 billion government loan. The facility will produce separated rare earth oxides—including neodymium, praseodymium, dysprosium, and terbium—and is scheduled to begin operations next year. Another major development is Arafura Rare Earths Limited’s Nolans Project, which has secured $840 million in federal funding and is projected to supply 4 percent of the global demand for neodymium and praseodymium starting in 2032. Overall, Australia is on track to triple its output of mined rare earth oxides between 2025 and 2027.
Domestically, Executive Order 14241 directs federal agencies to streamline permitting and accelerate the development of U.S. mineral projects, while invoking the Defense Production Act (DPA) to prioritize and fund the mining and processing of critical minerals on public lands. Currently, there is no heavy rare earth separation capacity in the United States, though efforts to build this capability are underway. The Department of Defense (DOD), in its 2024 National Defense Industrial Strategy, set a target to establish a fully integrated mine-to-magnet rare earth supply chain capable of meeting all U.S. defense requirements by 2027. Since 2020, the DOD has invested over $439 million to strengthen domestic supply chains. This includes a $9.6 million award to MP Materials in 2020 under the DPA Title III program to develop a light rare earth separation facility at Mountain Pass, California, followed by a $35 million award in 2022 for a heavy rare earth processing facility. These would be the first fully integrated rare earth facilities in the United States, spanning mining and separation at Mountain Pass to refining and magnet manufacturing in Fort Worth, Texas. However, even once operational, MP Materials is projected to produce only 1,000 tons of neodymium-iron-boron magnets annually by the end of 2025—less than 1 percent of the 138,000 tons China produced in 2018.
Gracelin Baskaran is director of the Critical Minerals Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Meredith Schwartz is a research associate for the Critical Minerals Security Program at CSIS.
