The Biden administration has raised alarms about China’s dominance in the rare earths market, where it currently controls 69.23% of global mine production in 2024. China’s dominance in rare earths has alarmed European and American industries. As a result, they’re still predicting a shortage going into the third quarter of this year.
The stakes are getting higher The anxiety around this situation is justified, since China holds close to 50 percent of the world’s rare earths reserves. Since late last year, the Chinese government has imposed drastic new export restrictions on these critical materials. These materials are essential for a wide array of industries—not just the electronics and renewable energy industries, but defense manufacturing. Following a mid-May trade truce with the United States, China began issuing single-use export licenses for rare earths, reflecting its tighter control over this strategic resource.
China’s tough requirements reportedly go as far as requiring verifiable assurances rare earths will not be used for military applications. This new requirement makes already tense international trade relations that much worse. It further raises concerns over the long-term availability of these materials.
In October, China’s plenum leaders are set to meet to hash out development objectives for 2026 to 2030. This meeting is a key element of China’s regular five-year planning process, which in recent years has laid out the strategic direction for the country’s economic policies. The new 14th five-year plan that began in 2021 is set to conclude at the end of this year. That clears the way for the next 15th five-year plan to start from 2025.
The European Union (EU) relies heavily on China for its rare earth needs. Yet last year, nearly 50 percent of its imports came from China. In 2024, EU-China trade hit €732 billion, cementing China’s position as the EU’s second-largest goods partner. New and rising tensions over rare earth exports could have serious impact on this important economic partnership.
“All of these things that we’re struggling with right now, to a big extent, is actually the outcome of policy choices,” stated Eskelund, highlighting how these policy decisions are affecting global supply chains.
A rare earths crisis is looming. This challenge was further exacerbated by prior production shocks earlier this year, creating a double whammy of challenges for manufacturers and suppliers alike. Businesses throughout Europe and the United States are preparing for crippling delays and unacceptable increases in costs as a result of these moves.
These plans really do make a difference. These plans will determine the future,” said Eskelund, noting the importance of China’s upcoming strategic plans and their likely impacts on global supply chains.
China is weaponizing its monopoly on rare earths to broaden its advantage in trade negotiations with the United States and other partners. This increased focus could unparalleled impact across all industries that depend upon these critical resources. The situation calls for urgent attention from policymakers and industry leaders as they navigate the complexities of international supply chains in an era of increasing geopolitical tension.