China’s rare earth export restrictions will hurt U.S. defense, energy & automotive Industries

China’s recently announced export restrictions on rare earths elements (REEs) are likely to adversely impact several U.S. commercial and defense technologies and should have been anticipated, according to researchers at the Washington, D.C.-based Center for Strategic and International Studies (CSIS).

On April 4th, China’s Ministry of Commerce imposed export restrictions on seven rare earth elements (REEs) and magnets “used in the defense, energy, and automotive sectors in response to U.S. President Donald Trump’s tariff increases on Chinese products,” according to CSIS.

CSIS said the Chinese restrictions are not a ban but a licensing system that can be used in a way that is prejudicial to the United States: “This development has three implications: first, there will likely be a pause in exports as the Chinese government establishes this licensing system. Second, there is also likely to be disruptions in supply to some U.S. firms given that the announcement also placed 16 U.S. entities on its export control list, limiting them from receiving dual-use goods. All but one of the firms on the list are in the defense and aerospace industries. It is unclear how China will implement the new licensing system. And third, the licensing system may be dynamic and could incentivize countries across the world to cooperate with China to prevent disruptions in their rare earths supply.”

Mine-To-Magnet REE Supply Chain

CSIS noted: “There is no heavy rare earths separation happening in the United States at present. The development of these capabilities is currently underway. In its 2024 National Defense Industrial Strategy, the Department of Defense (DOD) set a goal to develop a complete mine-to-magnet REE supply chain that can meet all U.S. defense needs by 2027.”

According to the U.S. Geological Survey, “Rare-earth elements (REE) are necessary components of more than 200 products across a wide range of applications, especially high-tech consumer products, such as cellular telephones, computer hard drives, electric and hybrid vehicles, and flat-screen monitors and televisions. Significant defense applications include electronic displays, guidance systems, lasers, and radar and sonar systems. Although the amount of REE used in a product may not be a significant part of that product by weight, value, or volume, the REE can be necessary for the device to function. For example, magnets made of REE often represent only a small fraction of the total weight, but without them, the spindle motors and voice coils of desktops and laptops would not be possible.”

The U.S. Geological Survey also noted that China was dominating production of REEs and its growing control over the market was evident: “In 1993, 38% of world production of REEs was in China, 33% was in the United States, 12% was in Australia, and five percent each was in Malaysia and India. Several other countries, including Brazil, Canada, South Africa, Sri Lanka, and Thailand, made up the remainder. However, in 2008, China accounted for more than 90% of world production of REEs, and by 2011, China accounted for 97% of world production. Beginning in 1990 and beyond, supplies of REEs became an issue as the Government of China began to change the amount of the REEs that it allows to be produced and exported. The Chinese Government also began to limit the number of Chinese and Sino-foreign joint-venture companies that could export REEs from China."

Impact on Defense

Gracelin Baskaran and Meredith Schwartz provided written responses to questions about the impact on April 14th. Baskaran is director of the Critical Minerals Security Program at the Center for Strategic and International Studies (CSIS) and Meredith Schwartz is a research associate for the Critical Minerals Security Program.

The two researchers said the Chinese export restrictions will be felt in several key defense technologies: “REEs are crucial for a range of defense technologies, including F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, Predator unmanned aerial vehicles, and the Joint Direct Attack Munition (JDAM) series of smart bombs. For example, the F-35 fighter jet contains over 900 pounds of REEs. An Arleigh Burke-class DDG-51 destroyer requires approximately 5,200 pounds, while a Virginia-class submarine uses around 9,200 pounds.”

The researchers said the United States has failed to make the necessary investments in critical defense technologies and is falling behind China: “The United States is already on the back foot when it comes to manufacturing these defense technologies. China is rapidly expanding its munitions production and acquiring advanced weapons systems and equipment at a pace five to six times faster than the United States. While China is preparing with a wartime mindset, the United States continues to operate under peacetime conditions. Even before the latest restrictions, the U.S. defense industrial base struggled with limited capacity and lacked the ability to scale up production to meet defense technology demands. Further bans on critical minerals inputs will only widen the gap, enabling China to strengthen its military capabilities more quickly than the United States.”

The CSIS researchers said China has a near monopoly on production: “The restrictions apply to seven medium and heavy rare earths: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. The United States is particularly vulnerable for these supply chains. Until 2023, China accounted for 99% of global heavy REEs processing…”

The United States is also far behind in developing its own REE capacity: “Even with recent investments, the United States is a long way off from meeting the DOD’s goal for a mine-to-magnet REE supply chain independent of China, and it is even further from rivaling foreign adversaries in this strategic industry. U.S. capabilities are largely early-stage.”

There are several countries that could be sources for REE capacity: “While several countries are working to develop their light and heavy rare earths deposits, China maintains a monopoly on refined heavy rare earths for the time being. Australia, Brazil, South Africa, Saudi Arabia, Japan, and Vietnam all have initiatives and investments underway to bolster key REE mining, processing, and research and development (R&D) as well as magnet manufacturing. For the United States to build alternative sourcing partners for long-term supply chain security, it is important to continue to provide financial and diplomatic support to ensure the success of these initiatives.”

Finally, the researchers say U.S. officials should have anticipated this problem: “Could the United States have seen this coming? Yes. Several policies have foreshadowed that REE export restrictions were on the horizon. China first weaponized rare earths in 2010 when it banned exports to Japan over a fishing trawler dispute. Between 2023 and 2025, China began imposing export restrictions of strategic materials to the United States, including gallium, germanium, antimony, graphite, and tungsten.”