On April 4, 2025, the Commerce Ministry in Beijing announced its decision to implement export control on some medium and heavy rare earth related items, as a retaliation against the tariffs imposed by the US in the ongoing trade war. Thankfully, due to the recent high level negotiation and subsequent earth export permits, now the involved parties may see the possible end of this standoff.
Two months of Havoc in the west
The US has tried resolving its rare earth reliance on China, but the efforts are largely unsuccessful. The Biden administration allocated $12 billion for rare earth stockpiles and domestic mining, but US ores still require processing in China due to technological gaps. Efforts to bypass China via Myanmar and Vietnam have led to more smuggling cases, with black market prices much higher than official rates.
Therefore, as the restrictions were implemented, the US saw a 70% year-on-year drop in rare earth magnet imports from China in May 2025, hitting the lowest level since 2015 (excluding pandemic years).
The EU isn’t doing well either. Facing an 81% plunge in rare earth magnet imports from China, it is accelerating its Critical Raw Materials Act to reduce dependency. Australia’s Lynas Corp and US-based MP Materials are expanding production, but their output remains insufficient to replace China’s 90% dominance in refining capacity.
Fragile truce after London negotiation
One month after a temporary pause in the trade war agreed upon in Geneva last month, where both nations suspended most tariffs exceeding 100% for 90 days, the high-level delegations from the US and China met again in London on June 9, 2025 to reinforce a truce in the ongoing trade dispute which has unsettled the global economy in the past few months. The Chinese delegation, led by Vice Premier He Lifeng and including Commerce Minister Wang Wentao, held talks with U.S. Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent, and Trade Representative Jamieson Greer at Lancaster House near Buckingham Palace.
As the world’s two largest economies, tensions between the U.S. and China have significant global implications; Chinese exports to the U.S. dropped 35% in May compared to the previous year. Since the Geneva talks, disputes have shifted over to advanced semiconductors critical for artificial intelligence, visas for Chinese students in the U.S., and more importantly, the focus of the talk: rare earth minerals essential to industries like automobile manufacturing and military industrial complex. As stockpiles ran down, the entire Western world was waiting for Beijing to address these concerns, which had come from European companies as well as U.S. firms.
On June 12, 3 days after the negotiation, the Chinese Ministry of Commerce spokesperson He Yadong made a statement during the ministry’s routine press briefing, announcing that China, as a responsible major country, acknowledged the legitimate needs and concerns for rare earth in civilian sectors, and had already approved a number of compliant applications in line with legal requirements.
This is a major icebreaker for the grueling US-China trade war. However, China also introduced a “one shipment, one license” policy, mandating exporters to disclose final recipients and usage details. While China resumed limited rare earth exports to US automakers (e.g., Tesla, Ford), it continues to deny shipments to defense-linked firms like Lockheed Martin, effectively blocking US defense contractors from accessing critical materials for advanced weaponry, including F-35 fighter jets and missile systems. The US Department of Defense warned that without Chinese supplies, its weapons production could face six-month disruptions.
Where do we go from here?
The temporary easing of rare earth exports signals a tactical pause rather than a strategic shift in the U.S.-China trade war. While Beijing’s move alleviates immediate supply chain pressures for civilian industries, the broader conflict remains unresolved.
For the U.S., this episode underscores the fragility of its supply chains. Despite attempting to source materials through seabed minging, third party trading and other methods, America still lacks the refining capacity to fully decouple from China. Meanwhile, Europe’s scramble to secure alternative sources has yet to yield meaningful independence.
The next phase of this battle may hinge on emerging technologies. China’s recent restrictions on drone components, which is another sector where it dominates, suggest a broader strategy of leveraging technological dependencies. If Washington continues its tariff offensive, Beijing could escalate by tightening exports of AI-related hardware or green energy materials.
Ultimately, both nations face a dilemma: further escalation risks economic disruption, yet compromise remains politically fraught. The coming months will test whether pragmatism prevails—or if the trade war enters an even more volatile phase.