The Consequences of China’s New Rare Earths Export Restrictions

On April 4, 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. The new restrictions apply to 7 of 17 REEs—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—and requires companies to secure special export licenses to export the minerals and magnets.

Q1: To what extent will the most recent export restrictions on rare earths impact U.S. sourcing of these critical minerals for defense technologies?

A1: There are various types of export restrictions: non-automatic licensing, tariffs, quotas, and an outright ban. The new restrictions are not a ban; rather, they require firms to apply for a license to export rare earths. 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.

Q2: What is the significance of the focus on heavy rare earths given U.S. supply chain vulnerabilities?

A2: 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 percent of global heavy REEs processing, with only minimal output from a refinery in Vietnam. However, that facility has been shut down for the past year due to a tax dispute, effectively giving China a monopoly over supply. China did not impose restrictions on light rare earths, for which a more diverse set of countries undertake processing.

Q3: Why are rare earths significant to U.S. national security?

A3: 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 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 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.

Q4: Is the U.S. rare earths industry ready to fill the gap in the event of a shortfall?

A4: No. 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. Since 2020, the DOD has committed over $439 million toward building domestic supply chains. In 2020, the Pentagon awarded MP Materials $9.6 million through the DPA Title III program for a light rare earths separation facility at Mountain Pass, California. In 2022, the Pentagon awarded an additional $35 million for a heavy rare earths processing facility. These facilities would be the first of their kind in the United States, fully integrating the rare earths supply chain from mining, separating, and leaching in Mountain Pass to refining and magnet production in Fort Worth, Texas. But even when these facilities are fully operational, MP Materials will only be producing 1,000 tons of neodymium-boron-iron (NdFeB) magnets by the end of 2025—less than 1 percent of the 138,000 tons of NdFeB magnets China produced in 2018. In 2024, MP Materials announced record production of 1,300 tons of neodymium-praseodymium (NdPr) oxide. In the same year, China produced an estimated 300,000 tons of NdFeB magnets.

The DOD has thrown its support behind Lynas Rare Earth’s U.S. subsidiary, Lynas USA, as well. The company was awarded a $30.4 million DPA Title III grant in 2021 for a U.S. separation facility for light REEs and another $120 million in 2022 for a heavy REE processing facility. These DPA investments are an important step in building completely independent supply chains for REE magnets.  

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. For example, in January 2025, USA Rare Earths produced its first sample of dysprosium oxide purified to 99.1 percent. Produced using ore from the Round Top deposit in Texas and processed at a research facility in Wheat Ridge Colorado, the company has called the development a breakthrough for the domestic rare earths industry. However, significant work remains to turn production of samples in a laboratory into full scale commercial production capable of reducing reliance on China. Developing mining and processing capabilities requires a long-term effort, meaning the United States will be on the back foot for the foreseeable future.

Q5: Could the United States have seen this coming?

A5: Yes. A number of 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.

In 2023, the Select Committee on the Strategic Competition between the United States and the Chinese Communist Party published a report titled Reset, Prevent, Build: A Strategy to Win America's Economic Competition with the Chinese Communist Party. It recommended that “Congress should incentivize the production of rare earth element magnets, which are the principal end-use for rare earth elements and used in electric vehicles, wind turbines, wireless technology, and countless other products.” Specifically, it advocated for Congress to establish tax incentives to promote U.S. manufacturing.

In December 2023, China imposed a ban of REE extraction and separation technologies. It had a notable impact on developing REE supply chain capabilities outside of China due to two main factors. First, China possesses specialized technical expertise in this field that other countries do not. For instance, it has an absolute advantage in solvent extraction processing techniques for rare earths, an area where Western companies have faced challenges both in implementing advanced technological operations and in addressing environmental concerns. Second, while multiple facilities for separation, processing, and manufacturing are currently being built, completing construction and bringing them fully online will take several years.

Q6: Are there any international partners from which the United States could alternatively source heavy rare earths and fill the supply gap?

A6: 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.

Australia is working to develop its Browns Range to become the first significant dysprosium producer outside of China. The deposit has estimated dysprosium reserves of 2,294 tons, to be unlocked in a multistage process resulting in 279,000 kg of dysprosium per year. However, much work remains to be done to build processing and refining capacity outside of China. Australia’s Lynas Rare Earths is the largest producer of separated rare earths outside of China, but still sends oxides to China for refining. Australia is expected to be reliant on China for REE refining until at least 2026.

Working with international partners can also help to overcome gaps in technological know-how when it comes to REE separation and processing. A few countries lead the way in developing critical minerals and REE-specific R&D initiatives to support the development of the strategic sector. The Australian Critical Minerals Research and Development Hub is working to boost international R&D cooperation on critical minerals. The hub includes rare earth and downstream processing initiatives lead by government agencies working in partnership with industry and universities to boost technical capacity. Japan has the Center for Rare Earths Research within its Muroran Institute of Technology as well as a joint initiative with Vietnam to improve REE extraction and processing at the Rare Earth Research and Technology Transfer Centre in Hanoi. The initiative was launched in 2012 as Japan looked to strengthen and diversify its REE supply chains in response to China’s REE export ban in 2010.

Gracelin Baskaran is director of the Critical Minerals Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Meredith Schwartz is a research associate for the Critical Minerals Security Program at CSIS.

If you are interested in learning more about this topic, explore CSIS's Executive Education course Building Critical Mineral Security for a Sustainable Future.