Since early April, China has nearly halted the export of critical minerals essential for the production of cars, robots, wind turbines, fighter jets, and other technologies.

Starting April 4, China effectively suspended the export of seven rare earth metals, along with high-performance magnets made from three of those elements. This export ban has led to a growing shortage of rare earths, which could even force many factories in the U.S. and Europe to shut down.

So why has China stopped exporting these materials, and more importantly—what happens next?

What Are Rare Earths?

There are 17 rare earth elements located near the bottom of the periodic table. Despite the name, most are not actually rare—they are scattered across the globe but are rarely found in high enough concentrations to mine economically.

They're called “rare” because separating them from one another is extremely difficult. Breaking the chemical bonds that naturally bind them requires over 100 processing steps and large volumes of strong acid.

Why Does China Control So Much of the Rare Earth Supply?

China mines about 70% of the world's rare earths. While countries like Myanmar, Australia, and the U.S. also mine rare earths, China processes 90% of global supply—including nearly all of Myanmar's output and close to half of what the U.S. produces.

China dominates especially in the processing of seven specific rare earth elements, which it has nearly stopped exporting since early April: Dysprosium, Gadolinium, Lutetium, Samarium, Scandium, Terbium, and Yttrium. These elements are almost exclusively mined in China and Myanmar and are among the most difficult to refine chemically. For heavy rare earths like dysprosium and terbium, used in heat-resistant magnets, Chinese refineries account for 99.9% of global supply.

Some of the world's richest deposits of heavy rare earths are located in a valley near Longnan in south-central China, with the resource belt extending westward into northern Myanmar.

Why Are These Seven Rare Earths So Important?

The automotive industry is the primary consumer of these metals, particularly for heat-resistant rare earth magnets. But semiconductors, medical imaging, robotics, offshore wind turbines, and various military systems also depend heavily on them.

Rare earth magnets can be up to 15 times more powerful than magnets made from common ferromagnetic materials. They're essential for the dozens of electric motors found in modern vehicles—for brakes, steering, and more. A luxury car seat alone may contain up to 12 rare earth magnets for its adjustment motors. Electric vehicles use even more magnets for motor drives. China produces about 90% of the world's rare earth magnets.

If even one supplier of these magnets runs out, entire automobile assembly plants may be forced to shut down, putting thousands of jobs at risk. For example, Ford's Explorer SUV plant in Chicago temporarily shut down last week due to a magnet shortage.

Most rare earth magnets are made from two light rare earth elements—neodymium and praseodymium—which China still exports, and which are also supplied in small quantities by Australia and the U.S.

However, these magnets lose much of their magnetism when exposed to high heat or strong electric fields. To prevent this, small amounts of dysprosium or terbium are added during production. Since gasoline engines and many electric motors generate significant heat, the auto industry relies heavily on heat-resistant magnets containing these heavy rare earths, which China has now largely stopped selling.

Globally, about 200,000 tons of rare earth magnets containing dysprosium or terbium are produced annually, in addition to 80,000 tons of simpler magnets used in lower-demand products like wallet clasps.

Why Did China Suspend Exports?

China's government claims the suspension of the seven rare earth elements and their magnets is due to their classification as dual-use items (with both civilian and military applications).

For instance, the most heat-resistant magnets, which use samarium instead of dysprosium or terbium, are essential for intercontinental ballistic missile guidance systems. China stopped exporting samarium this spring. An F-35 fighter jet contains about 25 pounds of rare earth magnets, most of which are samarium-cobalt based.

Yttrium is used in laser systems, including rangefinders for artillery, and scandium combined with aluminum helps make lightweight aircraft parts.

Four of the restricted elements are mostly used in civilian industries, with military applications representing only about 5% of rare earth magnet usage.

The U.S. argues that the real motive behind China's export controls is retaliation for the Trump administration's decision days earlier to raise tariffs on imports from China and several other countries.

What Happens Next?

On May 12, China and the U.S. agreed in Geneva to mutually reduce tariffs. China also agreed to pause the non-tariff measures it had enacted since early April.

However, China insists that the rare earth export controls apply to all countries, not just the U.S. While Chinese officials haven't made their position fully clear, this implies that the suspension may not be classified as a retaliatory non-tariff measure against the U.S.

U.S. Trade Representative Jamison Greer and Treasury Secretary Scott Bessent brokered the Geneva agreement. But the very next day, the U.S. Commerce Department tightened chip regulations on Huawei, banning Americans from purchasing or financing any of its chips—infuriating Chinese officials.

Meanwhile, China's Ministry of Commerce is still finalizing the licensing process for rare earth exports, which has caused additional delays. Some European companies, such as Volkswagen, have received supply approvals, but others haven't. Even as China seeks to repair ties with Europe, rare earth shipments to the continent have largely stopped, putting some European factories at risk of temporary closure.

Automakers in Detroit received approval for a few shipments last week, but supply shortages persist.

Currently, China requires individual licenses for each shipment, along with lengthy paperwork. Western companies are urging Beijing to grant three-month or annual export licenses per client to streamline the process.

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