The move, announced by Beijing, halts the shipment of key rare earth minerals such as dysprosium, terbium, and samarium—elements indispensable to high-performance magnets used in electric vehicles, smart devices, and advanced weapon systems.

This retaliatory step follows U.S. President Donald Trump’s 54% tariff hike on Chinese goods imposed on 2 April 2025, escalating an already intense trade war.

What’s at Stake?

According to China’s Ministry of Commerce, the country has enacted export controls on seven categories of medium and heavy rare earths, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium-related items, effective 4 April 2025.

These controls also apply to rare earth magnets, of which China accounts for 90% of global production.

Although a licensing mechanism is being developed, the system is not yet operational. This has led to a complete halt in shipments, with exporters facing waits ranging from six weeks to several months, causing immediate ripple effects in supply chains.

Why China Suspends Rare Earth Exports Is a Game-Changer

Rare earth minerals are the backbone of modern technological advancement. Dysprosium and terbium enhance magnet strength and heat resistance in EV motors and military-grade systems. Samarium is used in nuclear reactors, while scandium boosts aerospace-grade aluminum strength.

China not only produces 90% of the world’s rare earths, but also refines 99.9% of heavy rare earths—a dominance that gives it powerful leverage in global trade conflicts.

Immediate Threats to U.S. Sectors

Automotive Industry

The U.S. auto industry is already feeling the pinch. Electric vehicle (EV) makers like Tesla rely on neodymium, praseodymium, dysprosium, and other rare earths for motor magnets. As China suspends rare earth exports, production delays are looming. Industry experts warn that assembly lines in Detroit and beyond could grind to a halt.

Semiconductor Sector

The semiconductor industry, still recovering from past shortages, is now further strained. China’s earlier restrictions on gallium and germanium impacted chip performance. Now, with curbs on scandium and dysprosium, the heat intensifies. Companies like Intel and GlobalFoundries may suffer delays in next-gen chip manufacturing.

Aerospace & Defense

Military and aerospace applications are particularly vulnerable. The U.S. Next Generation Air Dominance (NGAD) program and advanced systems like the F-47 fighter jet depend on rare earth-based missile guidance and avionics. As China suspends rare earth exports, defense contractors are scrambling to reassess supply strategies.

Market Reactions as China Suspends Rare Earth Exports

The impact on markets was immediate. Shares of MP Materials, the only rare earth miner in the U.S., fell by 10.1% on 4 April. Conversely, USA Rare Earth, a company developing a rare earth magnet facility in Oklahoma, saw its stock surge 20%, highlighting investor demand for domestic alternatives.

Historical Context: Why China Suspends Rare Earth Exports Again

This isn’t the first time China has weaponized its rare earth monopoly. In December 2024, Beijing restricted exports of gallium, germanium, and antimony, citing national security. The current suspension marks a further escalation and reflects a strategic pattern in China’s foreign policy during trade confrontations.

China Suspends Rare Earth Exports and the Global Domino Effect

The effects aren’t confined to the U.S. As China suspends rare earth exports, other countries reliant on U.S.-based manufacturing will also feel the heat. European automakers, Asian semiconductor suppliers, and African mineral traders tracking global trade shifts are bracing for knock-on impacts.

Can the U.S. Offset the China Suspends Rare Earth Exports Crisis?

Though the U.S. has one operational rare earth mine in California (MP Materials), it lacks the refining infrastructure. Plans to rebuild domestic supply chains are underway, but processing facilities take years to become operational. For now, the U.S. remains heavily exposed.

What’s Next After China Suspends Rare Earth Exports?

• Short-Term: Expect production slowdowns, especially in EV and defense manufacturing.

• Medium-Term: Rising costs across industries due to scarcity and competition for limited supplies.

• Long-Term: Increased efforts to develop alternative supply chains and boost domestic refining capabilities in the U.S. and allied nations.