China, Rare earth exports control implemented...Emergency in U.S. industry and military supply chain

Amid US-China trade conflict, China's rare earth export restriction measure (Source: AFP)

As China began to actively restrict the export of rare earth elements in response to the US's high tariffs, a state of emergency has hit industries in major countries including the US. The New York Times reported on the 13th (local time) that the Chinese government started to limit the export of six types of heavy rare earth elements and rare earth magnets since the 4th, and this measure by China, which accounts for more than 90% of the global supply, could have a direct impact on the entire US defense and advanced manufacturing industries.

This measure is interpreted as retaliatory in nature following President Donald Trump's imposition of high reciprocal tariffs on Chinese products on the 2nd. The items currently restricted for export include heavy rare earth metals essential for the production of electric motors and magnets such as Gadolinium, Terbium, and Dysprosium, and special permission is needed for exports outside China, yet the Chinese authorities have not even established this permit system.

Heavy rare earth elements are key materials for motors in electric cars, drones, spacecraft, robots, and missiles, and are also essential in AI servers and smartphone components. If you include jet engines, car headlights, and laser equipment, the scope of industries affected by China's recent control is very wide. In reality, as the US industry nearly relies on China for key elements of the supply chain, this measure is aimed at a critical point.

MP Materials Chairman James Litinsky expressed concern, saying, "If drones and robots are the future of war, we are currently witnessing the collapse of that foundation." In fact, most US rare earth production relies on minerals mined in China, and since domestic reserves vary greatly by company, it is not easy to respond to crises. Daniel Pickard, an adviser to the US Trade Representative, pointed out, “The rare earth issue is not merely a trade issue but a matter of strategic assets.”

This measure includes not only the US but also Japan, Germany, and Korea. The Korean Ministry of Trade, Industry and Energy stated that there is currently no supply disruption, but explained that they plan to continually promote supply chain stabilization in the long term through public-private cooperation. Some companies in Japan are said to have secured more than a year's worth of stock, but NYT analyzed, "Since the level of holdings differs between companies, it is difficult to predict when production disruptions will occur if rare earths run out."

NYT recalled that in 2019, when President Xi Jinping visited a rare earth magnet plant in Ganzhou during Trump's first term and mentioned control over raw materials, reporting, “While no action was taken then, now the control is actually being exercised.” This move clearly demonstrates China's intention to use its resource strategy as a political and economic leverage, beyond simple responses.