New export restrictions directly impact key elements used in high-performance technologies, renewable energy systems, and advanced defense applications.
China has ramped up its control over critical minerals by imposing new export restrictions on seven types of rare earth elements. The move threatens to disrupt the global supply of materials essential for manufacturing advanced technologies.
The announcement, issued by China’s Ministry of Commerce, is widely viewed as a countermeasure to reciprocal tariffs imposed by former U.S. President Donald Trump. Under the new regulatory framework, exports of elements such as neodymium, dysprosium, and terbium will face stricter scrutiny. These elements are crucial for high-precision devices and next-generation military applications.
According to data from the U.S. Geological Survey, China accounts for approximately 70% of global rare earth production—and an even higher share of processing and refining capacity. Although rare earths represent only a small fraction of global trade by volume, their unique electronic, magnetic, and optical properties make them irreplaceable in most high-tech applications.
Market Response and Sector Impact
The market reacted swiftly. Shares of China Rare Earth Holdings Ltd. surged by 10% in Hong Kong, while China Northern Rare Earth Group rose 9.2%. In the international market, Lynas Rare Earths Ltd., the only major non-Chinese producer, gained 5.1% amid expectations of rising demand and higher prices.
From a technological perspective, the affected elements are directly tied to energy transition technologies and military systems. For instance, neodymium-iron-boron (NdFeB) magnets, vital for electric vehicle traction motors, rely heavily on these restricted materials. The Chinese restrictions pose a risk to the production of these magnets, which require high purity levels and complex metallurgical separation processes—areas where China retains a stronghold.
The Urgent Need to Diversify Supply Chains
Experts emphasize that while alternative deposits exist in countries such as Australia, Vietnam, and Brazil, the real bottleneck lies in processing capacity—a domain still dominated by China. Developing independent capabilities for refining and magnet manufacturing is a slow process, demanding sustained investment in R&D, infrastructure, and specialized environmental regulations.
In this context, Beijing’s move underscores the urgency of diversifying supply chains and investing in substitute materials or technologies that reduce dependency on rare earths. Institutions like the European Union and the U.S. Department of Energy have already designated these materials as strategic and launched programs to mitigate critical supply risks.
In the short term, however, pressure on the global tech and defense industries is likely to intensify, with ripple effects across multiple high-growth sectors.