China Continues to Exploit Rare Earth Chokepoints

Over the past decade, rare earth elements have emerged as one of the world's most strategically important commodities, but also one of its most vulnerable choke points. They are foundational materials found in everything from fighter aircraft and precision-guided munitions to electric vehicles and turbines and semiconductors. For decades, China invested heavily in every stage of the rare earth supply chain, mining, separation, refining, and magnet manufacturing as the centerpiece of its industrial strategy. Today, while China produces roughly 2/3 of global rare earth ore, it has built up to 90% of the world's processing capacity and an overwhelming 85% share of global rare earth magnet production. As geopolitical competition intensifies, Beijing has repeatedly demonstrated its willingness to use this dominance as an instrument of economic statecraft against the United States as well as its closest allies. Today, Merida Schwartz and I will review the latest data on the true impact of China's export restrictions and how the United States is mobilizing its response. >> First, let's take a look back at how we got here. China's use of rare earth export restrictions has become more frequent, sophisticated, and targeted to damage the economic competitiveness and defense preparedness of its adversaries. The first major incident occurred over 15 years ago in September 2010 when China effectively halted rare earth exports to Japan during a maritime dispute. That event served as an early warning that over-dependence on China as the globe's rare earth supplier produces vulnerability during periods of geopolitical tension. However, the United States would not mobilize to address the supply chain vulnerability for another decade. In December 2023, a new era of rare earth export restrictions began. China prohibited the export of certain rare earth separation and processing technologies to preserve its technological advantage. In April 2025, Beijing escalated further by restricting exports of seven heavy rare earth elements. The impacts on Western industry were widespread and severe. Auto manufacturers from Ford to Suzuki reported pauses in production due to supply disruptions. Prompt bilateral negotiations helped to ease restrictions somewhat in July 2025, but by October China had moved beyond simply controlling raw materials. The government expanded restrictions across virtually the entire rare earth ecosystem, including materials, processing technologies, manufacturing equipment, and downstream technologies. In November 2025, President Trump and President Xi met in in South Korea to de-escalate tensions, reaching an agreement to suspend restrictions through a one-year moratorium. But this has not stopped Beijing from leveraging its rare earth dominance to exert pressure on foreign nations and companies it views as threatening its market dominance or core national interests. In January 2026, China imposed new restrictions on Japan directly following comments the Prime Minister made regarding the Taiwan Strait. In May 2026, Chinese authorities detained two Japanese nationals suspected of smuggling goods and violating rare earth export controls. Finally, in June 2026, China expanded its export control list to include 10 new US entities, including major rare earth companies MP Materials and USA Rare Earths. China is no longer simply regulating exports. It has developed a comprehensive toolkit capable of influencing access to raw materials, industrial technologies, equipment, skilled workers, and international supply chains. While China may have lifted its export bans in theory, in practice shows a very different story. Following the April 2025 export restrictions, exports of rare earth to the United States collapsed almost immediately. Shipments that had regularly measured between 50 and 150 metric tons per month fell down to zero. And following the November 2025 moratorium announcement, exports technically resumed. However, the recovery was very modest. Instead of returning to pre-export restriction levels, exports remain well below historical averages for months. This slow recovery shows that while trade deals may be negotiated, Beijing retains a considerable amount of leverage and control over global export flows, determining who gets an export license and when. This makes US efforts to build alternative mine-to-magnet rare earth supply chains of critical importance to secure supply regardless of whether Beijing has technically lifted its export restrictions. >> Certain materials have been more challenging to source than others, putting stress on industries that depend on small but reliable shipments of materials. Before China's April 2025 restrictions, the United States imported 333 tons of yttrium over an 8-month period. In the 8 months afterwards, imports fell to only 17 tons, a decline of approximately 95%. Yttrium plays a vital role in advanced aerospace manufacturing. It is used in thermal barrier coatings that protect jet engines blades from extreme temperatures. Yttrium is also used in advanced ceramics, lasers, specialty electronics, and several semiconductor manufacturing processes. At the time, aerospace manufacturers reported rationing yttrium supplies and evaluating whether production schedules would need to be adjusted if shortages continued. >> The impacts of China's export restrictions are not uniform globally. In fact, the United States has been severely targeted compared to European importers. Globally, exports actually increased from approximately 2.1 million kilograms to roughly 2.4 million kilograms before and after the negotiated moratorium in South Korea. Yet, exports to the United States declined from 89,000 kg to about 67,000 kg. Selective restrictions allow China to continue to export to many countries and generate revenue while preserving leverage over specific competitors. Additionally, differentiated access can create divergent economic incentives among allies. As the United States works to build ex-China mine-to-magnet supply chains, it will require the cooperation of allies and partners to drive demand, increase processing capacity, and pool both natural and financial resources. Even though certain countries may currently be facing greater supply disruptions than others, no country or industry will be insulated from the risks of a supply chain that can be weaponized at Beijing's discretion. >> Washington has mobilized an unprecedented campaign to build resilient supply chains with trusted partners. This chart illustrates US government investment across multiple continents, taking the form of export-import bank loans, DFC financing, and even Pentagon off-take guarantees. Australia has emerged as one of the most important US partners in the push for critical mineral security. Following the bilateral US-Australia agreement signed in October 2025, EXIM has supported approximately 2.2 billion dollars in financing. Brazil has received approximately 565 million dollars in DFC loan financing for the Serra Verde Pela Ema mine in Brazil. The project is on track to be the first commercial-scale producer of four rare earth elements from an ionic clay deposit outside of China. Saudi Arabia has attracted approximately $750 million through a Department of War equity agreement for a rare earth refinery. And Malaysia became the first country outside of China to produce refined dysprosium oxide at commercial scale. This accomplishment follows a decade of investment by Lynas Australia and Japan's JOGMEC. The US Pentagon is now looking to support the endeavor with a $96 million off-take agreement at a guaranteed price floor of $110 per kilogram. Additional projects span Greenland, Canada, Angola, Mozambique, and South Africa. Still, it's important to note that many of these projects have only received letters of intent subject to definitive feasibility studies, not finalized capital commitments. No single country can replicate China's vertically integrated rare earth industry overnight. Instead, resilience will come from bringing together an interconnected network of allied miners, processors, refiners, financiers, and manufacturers, each contributing according to its comparative advantage. >> How do we ensure that the United States sees its strategy to secure rare earth supply chains through from funding announcement to large-scale production? First, it's important to recognize that no two rare earth deposits are alike, and each will require a different combination of technical and financial and diplomatic supports. Deposits vary both in mineral composition and ore grade. Rare earths are among the most difficult mineral commodities to produce economically. Higher grade deposits require less material to be extracted and processed, making separation more efficient and significantly reducing overall cost. As we see here, ore grades can vary significantly between deposit. The Browns Range deposit in Australia is an exceptional deposit of heavy rare earth elements, while projects like Round Top in Texas are particularly low grade. These differences in risk profile and resource value must be taken to account when determining government backing. Second, driving ally demand is equally as important as driving supply. Building mines and separation facility means little if there's no guaranteed buyer on the other end willing to pay above the Chinese set price. The Trump administration has consistently prioritized the removal of Chinese rare earth from defense supply chains. Most recently, in July 2026, the administration released an executive order securing America's defense supply chains and ensuring domestic acquisition of critical materials. Mandating that US defense equipment and component manufacturers do not source material from adversary linked suppliers unless explicitly waived. The US defense industry is a crucial, but nevertheless small off-taker of materials, and the Pentagon alone cannot support the entire industry. Ally coordination will be required. While the G7's target to reduce dependence on Chinese rare earth to no more than 60% by 2030 is a meaningful signal. Targets do not move supply chains unless supported by private sector procurement commitments. And finally, durable resilience will require a consistent long-term policy approach instead of the historical pattern of ramping up during crisis only to scale back in periods of calm. A moratorium on Chinese rare earth export restrictions is not a meaningful reprieve. Rather, achieving the United States goal of rare earth independence will require years of consistent government commitment to bold industrial policy. Thank you so much for joining us today for our update on the state of rare earths. >> [music] >> Mhm.