China is continuing to enforce strict export controls on seven critical rare earth metals destined for the United States, despite the recent easing of certain non-tariff measures. This announcement coincides with the Chinese Commerce Ministry’s desire to cement its new-found bargaining position in continued talks with Washington.
The metals at issue—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—are vital ingredients in many advanced technologies. They are essential components for military platforms, as well as COTs consumer electronics. Further, the majority of the REEs imported into the United States—by as much as 87 percent—are sourced from China. This dependence is cause for alarm given the specter of shortages and how those shortages might undermine U.S. defense readiness.
On April 4, China dominated frontpages again with an equally seismic but different announcement – to relax its trade regulations. Specifically, they removed 28 American companies from its dual-use export control list, giving them a 90-day reprieve. The announcement maintained the previous administration’s ban on seven rare earth metals. Taken together, this decision is a powerful indication of the strategic importance of remaining in control of essential resources.
The Commerce Ministry asserted the necessity for comprehensive oversight of strategic minerals, emphasizing that “all departments agree that comprehensive control of strategic minerals is essential.” At its core, this announcement is indicative of China’s continued efforts to rein in its often chaotic rare earth industry under the auspices of national security.
In retaliation, China has since added 17 companies to their “unreliable entity list.” Consequently, these firms are no longer able to import or export from/to China, nor are they allowed to enter into new investments within the country. Among the hardest hit were local notables — including Teledyne Brown Engineering and Kratos Unmanned Aerial Systems. The move is largely viewed as a retaliatory strike against tariffs enacted by former President Donald Trump.
Trade policies are in the midst of radical shifts. China has taken 17 companies off of its own export control list, with 11 of those companies reportedly receiving a temporary stay of execution for 90 days. Last month, China announced more restrictive export controls on rare earth metals. This action is just one step in a previously announced, multi-pronged strategy focused on retaliation against U.S. tariffs.
Analysts say this ongoing ban on rare earth metals threatens to do serious harm to U.S. defense industries. Yuyuantantian commented on the situation, questioning, “With U.S. defense industries now ‘strangled by rare earth shortages’, what changes might occur in American weapons and equipment?”
The long-simmering trade dispute highlights China’s growing clout as the top supplier of rare earth metals. It further highlights China’s increasingly important place in the global trade landscape. As negotiations proceed, it remains to be seen how these restrictions will affect both countries’ economic relations and industries reliant on rare earth elements.
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