“After the U.S. and China mutually paused tariffs, rare earth exports have now become the focal point,” reported Fortune magazine on May 12. The U.S. hopes to maintain its access to Chinese rare earths, while China views its dominance in the rare earth sector as a “weapon” to counter U.S. threats, making this issue one of the most critical aspects to handle in their trade agreements.

After two days of negotiations, the U.S. and China released a joint statement on the 12th, agreeing to reduce tariffs within 90 days by 115%. In the statement, China also promised to “take necessary actions to suspend or cancel non-tariff countermeasures against the U.S. starting April 2, 2025,” but did not specify which measures would be suspended or canceled.

This development has led the U.S., which relies on Chinese rare earths, to question: Will China loosen its export controls on rare earths?

“China’s dominance in this area might be one of the most significant means for China to exert influence on the U.S.,” said Dexter Roberts, a non-resident senior fellow at the Atlantic Council. He believes China is unlikely to relax its export controls. “They are using rare earth (export controls) to punish the U.S., and they are unlikely to discard this part of their economic arsenal.”

Rare earths awaiting export in Lianyungang, Jiangsu – Reuters

China holds absolute dominance in the rare earth market. According to relevant data, about 60% of the world’s rare earths are mined in China, and nearly 90% are refined and processed before being exported worldwide.

This, of course, includes the U.S. The New York Times reported on April 16 that among the 50 critical minerals listed by the U.S. Geological Survey, over half come from China, including 17 rare earth elements. Many of these elements have high-temperature resistance properties and are often used in the manufacture of high-quality magnets, glass, lamps, and batteries, even serving as key materials for F-35 fighter jets, submarines, missiles, radar systems, and other military equipment.

This makes rare earths a “trump card” China can play in this round of trade warfare. Following Trump’s launch of a full-scale tariff war on April 2, China quickly responded with “11 arrows” on April 4, which firmly included export controls on seven types of heavy rare earth-related items such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.

At that time, foreign media interpreted that China was establishing an export licensing system; to purchase Chinese rare earths, one must first apply for an export license. Tesla was among the first companies to apply for this license as they need rare earths for battery production in electric vehicles. On April 22, during Tesla’s earnings call, Elon Musk also mentioned that the production of their humanoid robot “Optimus” was affected by China’s restrictions on rare earth magnet exports. They are in talks with China, hoping to obtain the export license for rare earth magnets.

Several rare earth elements – Reuters

Following the joint statement on the Geneva trade talks of May 12, these American companies are closely watching for potential changes in rare earth export control measures. Reuters, citing sources, reported that China is unlikely to fully lift export controls.

Joerg Wuttke, partner of consultancy DGA-Albright Stonebridge Group and China trade expert, stated that the Chinese do not wish to sever ties with the U.S., but use this leverage to pressure the U.S.

Roberts also believes China will not shy away from using rare earths to counter the U.S. He said, “I don’t think China is really worried that if they take overly aggressive measures, they will suddenly lose influence in the rare earth market. I don’t believe so.”

China’s recent crackdown on smuggling of strategic minerals seems to indicate that export controls will not easily be relaxed. A spokesperson for China’s Ministry of Commerce, in response to related activities on the 12th, stated that since China implemented export controls on some strategic minerals, some foreign entities have colluded with domestic individuals to circumvent export controls through smuggling. To curb such activities, the National Export Control Work Coordination Mechanism Office held a field meeting in Shenzhen, Guangdong, on May 9, focusing on combating strategic mineral smuggling, and has planned a series of future actions.

The field meeting further clarified the tasks of the Ministry of Commerce, Ministry of Public Security, Ministry of State Security, General Administration of Customs, and State Post Bureau in this special operation. It called for stronger cooperation and severe crackdowns on strategic mineral smuggling exports, forming a “concerted high-pressure situation” with effective measures to firmly prevent illegal outflows of strategic minerals.

Under the backdrop of Chinese export controls, Fortune magazine noted that the U.S. strives to keep a stable export of rare earth minerals while also looking for other rare earth-producing areas such as Greenland and Ukraine. However, their mining levels do not compare to China, and the high cost of extracting rare earth elements makes it difficult to proceed. Also, U.S. mineral agreements with allies require time for negotiation and implementation. According to S&P Global, building a new mine takes an average of 18 years before operations can begin, which means U.S. efforts remain a mid-term or long-term goal.

Moreover, compared to China, the U.S. still lacks in rare earth element separation and processing technologies. The Center for Strategic and International Studies (CSIS) explained in a report that the U.S. currently lacks the capability to separate heavy rare earths, with these technologies still developing domestically.

In January 2025, an American company produced its first dysprosium oxide sample with a high purity of 99.1%, using ore from Texas and processed at a research facility in Colorado, which was hailed as a “breakthrough” for the U.S. rare earth industry. However, CSIS stated that more work is needed to convert lab samples into commercial products. “Developing mining and processing capabilities requires long-term effort, meaning that in the foreseeable future, the U.S. will be at a disadvantage.”

Fortune concluded that all this suggests the most probable outcome is a further reconciliation with China—no matter how difficult.

Editor: Zhongxiaowen