CNBC reports that China defended its rare earth export restrictions on Sunday. The country's Ministry of Commerce called the controls necessary and legitimate. Beijing stated it will not engage in a tariff war but remains unafraid of one.

The announcement came after President Trump threatened 100 percent tariffs on Chinese goods. Trump said the tariffs would begin November 1 in response to China's mineral export limits. US Trade Representative Jamison Greer commented that America considers China's actions troubling. The restrictions require foreign companies to obtain licenses for products containing more than 0.1 percent Chinese rare earths.

China expanded its rare earth controls on October 9, adding five minerals to restrictions. The new rules cover holmium, erbium, thulium, europium, and ytterbium. Companies must also seek approval to export products made with Chinese extraction or processing technology. Applications for military-related items will be denied automatically starting December 1.

Supply Chain Vulnerabilities Exposed

These restrictions matter because America relies heavily on Chinese minerals for critical industries. Al Jazeera notes that the US imported $22.8 million in rare earth products from China in 2023. Between 2020 and 2023, America sourced 70 percent of its rare earth compounds from China.

Defense contractors, automakers, and technology manufacturers face immediate challenges. China processes around 90 percent of global rare earths used in smartphones and fighter jets. The restrictions take effect at different times, with most becoming active by December 1. This timing gives negotiators roughly 2.5 months before full implementation.

The controls grant Beijing additional leverage before the planned Trump-Xi meeting. Both leaders are expected to attend the Asia-Pacific Economic Cooperation summit in South Korea. Trade talks have continued intermittently since the countries agreed to a 90-day pause in August.

Reshaping Global Mineral Markets

The restrictions reflect a broader shift in how nations view critical mineral supplies. CSIS explains that China applied the foreign direct product rule for the first time. This mechanism mirrors tactics Washington uses to restrict semiconductor exports. Beijing now controls 12 of 17 total rare earth metals through export licenses.

American companies have accelerated efforts to build domestic supply chains. The Department of Defense invested $400 million in MP Materials during July 2025. The government became the company's largest shareholder through this equity deal. MP Materials operates the only US rare earth mine at Mountain Pass, California.

However, domestic production remains minimal compared to Chinese output. MP Materials will produce roughly 1,000 tons of magnets by late 2025. China manufactured 138,000 tons of the same magnets in 2018. The US still cannot commercially separate heavy rare earths needed for advanced military systems.

Australia has emerged as an alternative supplier through partnerships with American firms. Japan reduced its Chinese dependence from 90 percent to 60 percent after similar restrictions in 2010. Both nations invested heavily in recycling programs and alternative mining operations. Western manufacturers now face choices between operational needs and geopolitical risks in their sourcing decisions.

Further Reading

For deeper insights into global adoption trends, our Alternative Financial Systems Index tracks regulatory frameworks and adoption metrics across 50 countries. The index provides analysis of how nations manage strategic resource dependencies and economic relationships.