Author: Florence W. YANG (Assistant Professor, NCCU Program in Japan Studies, National Chengchi University)
DOI: 10.30402/EAS.202512_56(2).0002
Amid the 2025 U.S.-China tariff dispute, China has implemented export controls on rare earths as a countermeasure, once again thrusting them into the global spotlight. For most people, “rare earths” is a familiar name. Yet the reasons behind` their critical importance remain poorly understood. This article provides a brief analysis of the current state of the rare earth supply chain. It addresses three dimensions: the importance of rare earths, the current status and vulnerabilities of their supply chain, and China’s 2025 rare-earth export controls.
I. The Importance of Rare Earths
“Rare earths” is a collective term for 17 elements. These include the 15 lanthanide elements—Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Promethium (Pm), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Holmium (Ho), Erbium (Er), Thulium (Tm), Ytterbium (Yb), and Lutetium (Lu). Yttrium (Y) and Scandium (Sc) are also included. While rare earth metals are technically classified as “rare metals,” the latter category is broader and includes other vital minerals such as nickel, chromium, and tungsten. Due to their similar names, news reports occasionally confuse the two terms.
Table 1 lists the primary uses of rare earth elements, as their applications vary significantly. In recent years, the most critical and frequently discussed application has been the neodymium magnet, which primarily uses the rare-earth elements Neodymium (Nd) and Dysprosium (Dy).
Table 1: Primary Uses of Rare Earth Elements
| Symbol | Element Name | Primary Uses |
| Ce | Cerium | Abrasives (polishing agents), automotive exhaust catalysts, steel additives, glass additives (decolorization and UV absorption), Fluid Catalytic Cracking (FCC) catalysts, phosphors, nickel-metal hydride (NiMH) batteries. |
| La | Lanthanum | FCC catalysts, optical lenses, NiMH batteries, steel/foundry additives, phosphors, abrasives, ceramic capacitors. |
| Nd | Neodymium | Neodymium magnets, glass additives, NiMH batteries, ceramic capacitors, FCC catalysts. |
| Y | Yttrium | Yttria-stabilized zirconia (YSZ), phosphors (red), optical glass. |
| Pr | Praseodymium | Permanent magnets, ceramic tile coloring agents (yellow), glass colorants (green), ceramic capacitors. |
| Gd | Gadolinium | Permanent magnets, optical glass, phosphors (green), neutron-absorbing materials (medical imaging, nuclear reactors). |
| Dy | Dysprosium | Neodymium magnets (especially high-temperature-resistant ones). |
| Sm | Samarium | Samarium-cobalt magnets. |
| Er | Erbium | Glass additives (optical fibers, lasers). |
| Eu | Europium | Phosphors (blue and red). |
| Tb | Terbium | Phosphors (green). |
Source: Japan Organization for Metals and Energy Security (JOGMEC)[1]
II. The Rare Earth Supply Chain and Its Vulnerabilities
Until the 1980s, the Mountain Pass mine in California, the United States, was the world’s leading producer of rare earth. In the mid-1980s, the Chinese government encouraged production through various measures, including the introduction of export tax rebates for rare earth products in 1985 in 1985, which effectively lowered the price of Chinese rare earths and made them highly competitive in the global market. By 2005, China accounted for 97% of global rare earth production.
However, after 2005, China’s rare-earth policy shifted toward resource nationalism. This led to a series of measures to strengthen state control over these minerals. First, it restricted exports by setting annual quotas. These dropped from 51,000 tons in 2005 to 24,280 tons in 2010, a reduction of nearly half. Second, it abolished export tax rebates and gradually increased export taxes. Third, it tightened control over the industry, most notably through the consolidation of domestic rare earth enterprises. By 2015, the industry had been restructured into a landscape dominated by six major state-owned enterprise groups. In 2021, China Minmetals Rare Earth, Chinalco (China Rare Earth & Metals), and China Southern Rare Earth Group merged to form the China Rare Earth Group.[2] In 2023, Xiamen Tungsten and in 2024, the Guangdong Rare Earths Group, were also integrated into the China Rare Earth Group. This resulted in the formation of two major groups: the China Northern Rare Earth Group, which focuses on Light Rare Earth Elements (LREEs), and the China Rare Earth Group in the south, which focuses on Heavy Rare Earth Elements (HREEs).
Beyond production, China is particularly dominant in rare earth refining. Currently, China accounts for about 70% of global rare earth production. Minerals extracted in other countries are also sent to China for processing. As a result, China accounts for 90% of global refining volume. Its share of heavy rare earth refining reaches a staggering 99%.[3]
At present, the global rare earth supply chain is highly dependent on China. China is the only country with a complete and integrated supply chain. This vertical integration extends from upstream mineral production, separation, and refining to the production of metal alloys or oxides. It continues through midstream processes such as processing, sintering, cutting, and grinding, and culminates in downstream finished products such as neodymium magnets, Permanent Magnet Motors, and electric vehicles. China’s global market share of rare earth magnets also exceeds 80%. Japanese magnet manufacturers, who once held a dominant lead, now hold just over a 10% share.[4]
Why does the rare earth supply chain remain dependent on China, and what challenges prevent diversification?
First, regarding the production of rare earth, a distinction can be drawn between Light Rare Earth Elements (LREEs) and Heavy Rare Earth Elements (HREEs). While LREEs are produced on a steady basis at the Mountain Pass mine in the United States and the Mount Weld mine in Australia, HREE production remains heavily concentrated in China. HREEs are more easily obtained from ion-adsorption clay deposits, where the minerals are distributed in near-surface layers and can be extracted through solvent leaching. Regions in southern China, such as Jiangxi, Guangdong, and Fujian, are characterized by this type of deposit.
Although rare earths are not actually rare and many countries possess rare earth deposits, the question arises: Why not produce rare earth minerals in other countries? First, a mining project requires a massive investment of time and capital from initiation to development and production. However, the market for rare earths is less than one-fiftieth of the copper market. This small scale leads to severe price fluctuations. If China, which already possesses monopolistic market power, strategically lowers market prices, new producers will inevitably be unable to compete. The prospect of committing enormous investments without guaranteed returns, combined with the inability to compete with the relatively low prices and consistently high quality of Chinese products, deters potential investors.
Second, in the separation and refining process, effectively isolating rare earths from other metals requires hundreds of solvent-extraction cycles. This process generates large quantities of wastewater and radioactive residue. This results in severe environmental pollution. Because environmental regulations in advanced nations are stricter, separating and refining in these countries incurs significantly higher costs. This is one reason why the United States and others abandoned domestic production since the 1980s. They chose to purchase rare earths directly from China instead. Additionally, many countries have closed their own rare earth mines and smelters for years. As a result, the development of technical expertise and personnel has been neglected. This also explains why rare-earth ores produced in the United States are still sent to China for separation and refining.
Third, from an economic perspective, downstream manufacturers, such as neodymium magnet producers, seek the cheapest and highest-purity rare-earth metals. End-product manufacturers, such as electric vehicle companies, require the most affordable rare-earth magnets to keep their products price-competitive. After the 2010 rare earth crisis, various governments have sought to reduce their dependence on the Chinese rare earth supply chain. However, given the concerns above, it is difficult to persuade private enterprises to invest in new supply chains unless governments provide sufficient policy and financial support.[5]
III. China’s 2025 Rare Earth Export Controls
The First Wave in April
U.S. President Donald J. Trump returned to office in January 2025 and quickly initiated a series of additional tariffs on various countries in February, most notably what the administration termed a “Reciprocal Tariff” imposed in April. China retaliated against these measures. One of the most prominent actions was the imposition of export restrictions on rare earths. On April 4, 2025, the Ministry of Commerce and the General Administration of Customs of China announced new export controls on seven rare-earth elements and related products. Relevant enterprises must obtain export licenses from the Ministry of Commerce prior to export. The controlled items include seven medium and heavy rare earth elements—Samarium (Sm), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Lutetium (Lu), Scandium (Sc), and Yttrium (Y). The controls also cover related compounds, oxides, alloys, mixtures, and finished products, including rare-earth magnets.[6]
The Second Wave in October
On September 29, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced the so-called “50% rule,” under which subsidiaries that are 50% or more owned by entities on the “Entity List” would also be subject to licensing requirements. This move effectively expanded export restrictions targeting China. In response, the Chinese Ministry of Commerce launched a second wave of retaliatory rare earth sanctions on October 9, 2025. First, it expanded the scope of items requiring export licenses; this wave not only added five more rare earth elements—Holmium (Ho), Erbium (Er), Thulium (Tm), Ytterbium (Yb), and Europium (Eu)—but also mandated export licenses for specific rare earth equipment and related raw and ancillary materials. Furthermore, the export of technologies related to rare earth mining, smelting and separation, metal smelting, magnetic material manufacturing, and the recycling and utilization of secondary rare earth resources now also requires an export license.[7] Second, China introduced export restrictions based on “long-arm jurisdiction.” Foreign companies must obtain a dual-use item export license issued by the Chinese Ministry of Commerce when exporting rare earths or related products containing 0.1% or more of Chinese rare earths to countries other than China. This same requirement applies to production activities conducted outside China that utilizes rare earth-related technologies of Chinese origin.[8]
The Significant Short-Term Impact of Retaliatory Measures
The impact of rare-earth export restrictions has been significant. Before the implementation procedures for the new licensing system in April were clarified, shipments of rare earth products from China were temporarily suspended. Many American and Japanese manufacturers reported they could not receive scheduled imports of rare-earth magnet products, and several production lines were forced to halt operations. For instance, Ford briefly shut down the Explorer SUV assembly line at its Chicago plant, while Suzuki suspended production on the Swift model’s assembly line.
The primary objective of China’s two waves of retaliatory measures was to increase its negotiating leverage. Following the first wave of retaliation, the U.S. and Chinese governments returned to the bargaining table. After reaching a preliminary agreement at the London talks in June 2025, exports of rare-earth magnets to the United States gradually resumed thereafter, according to data from the General Administration of Customs of China. Regarding the second wave, even before it was officially implemented, China and the U.S. engaged in negotiations and reached an agreement in late October. Both sides made concessions, resulting in a one-year deferment for the implementation of their respective policies.
IV. Long-term Outlook
The impact of China’s retaliatory measures on rare earths in 2025 has extended beyond a mere shortage of rare earth metals; those most severely affected actors are automakers dependent on Chinese rare earth magnets. This reflects the integrity and completeness of China’s rare earth supply chain, within which its rare earth magnet manufacturing also commands an extremely high global market share. Because the second wave of retaliatory measures was deferred for one year before being officially implemented, China’s actual capacity for “long-arm jurisdiction” over foreign companies remains untested. However, since nearly all foreign rare-earth-related companies inevitably use at least 0.1% of Chinese-produced rare earths, the impact would be exceptionally severe if effectively enforced.
Since the 2010 rare earth crisis, countries led primarily by Japan have begun exploring alternative rare earth sources, developing recycling technologies, and advancing magnet and motor technologies that reduce or eliminate the need for heavy rare earths. Rare-earth mines outside China are located in the United States, Australia, India, and Vietnam. Australia is of particular importance; the Australian company Lynas Rare Earths announced it would begin producing dysprosium oxide and the heavy rare earth terbium starting in mid-2025. This makes Lynas the only enterprise outside China to achieve commercialized production and separation of heavy rare-earth products. Within Japan, companies such as Shin-Etsu Chemical and Mitsui Mining & Smelting possess advanced processing and refining capabilities, while enterprises such as Japan Atomic Energy Agency and Mitsubishi Materials have established rare-earth recycling technologies. Furthermore, many automakers now possess motor technologies that require no heavy rare earths; notably, Honda has already directly applied these in models such as the Fit, Grace, and Shuttle.[9]
In light of this, while the issue of dependence on China’s rare earth supply chain involves certain technical hurdles, it is primarily driven by cost considerations. Without government support or long-term contracts, it is difficult for new rare earth mines and refineries to survive a price war with China. When companies prioritize costs, it remains difficult to commercialize rare-earth recycling or permanent-magnet motor technologies that reduce or eliminate heavy rare-earth use. However, if rare earths are frequently weaponized in economic sanctions, leading foreign enterprises to question the stability of Chinese supply, the construction of a “de-Sinicized” rare earth supply chain may become an inevitability. In such a scenario, cost considerations would become a secondary concern.
[1] Japan Organization for Metals and Energy Security, 2025, “Kōbutsu shigen materiarufurō 2024 reaāsu” [Mineral Resources Material Flow 2024 Rare Earths] November 20, 2025, https://mric.jogmec.go.jp/wp-content/uploads/2025/11/material_flow2024_REE.pdf, p. 4. accessed on Dec. 1, 2025.
[2] Florence W. Yang, 2025, “Rare Earth and Resource Nationalism: What Happened Before and After China’s Embargo on Japan?” Journal of Contemporary China 34(153): 389-192, 395-397.
[3] “Rare Earth Separation and Refining: China’s Dominance and Global Efforts to Catch Up,”Rare Earth Exchanges, August 30, 2025, https://rareearthexchanges.com/news/rare-earth-separation-and-refining-chinas-dominance-and-global-efforts-to-catch-up/ accessed on Dec. 1, 2025.
[4] Until 2015, high-performance neodymium magnets were almost a Japanese monopoly. However, after the 2010 rare-earth crisis, some Japanese companies, such as TDK and Hitachi Metals (now Proterial), shifted toward collaborating with Chinese enterprises and establishing factories in China; since then, the manufacturing technology of Chinese companies producing neodymium magnets has advanced rapidly. “Zhōngguó xītǔ (2) rì qǐ cítiě qiǎorán shīqù shìchǎng” [Chinese Rare Earth (2) Japanese Magnet Companies Quietly Lose Market Share], Rìjīng Zhōngwén Wǎng [Nikkei Chinese Website]. June 19, 2025, https://zh.cn.nikkei.com/china/ccompany/59126-2025-06-19-05-00-37.html accessed on Dec. 1, 2025.
[5] The 2010 rare earth crisis refers to an incident in September 2010 when a Chinese fishing boat collided with Japanese patrol vessels in the waters near the Senkaku (Diaoyu) Islands, leading to the Japanese side arresting and detaining the captain of the Chinese trawler. China responded with several retaliatory measures, including suspending rare-earth exports to Japan, which ultimately forced Japan to release the captain
[6] Ministry of Commerce of the People’s Republic of China, 2025a, “Shāngwù bù hǎiguān zǒng shǔ gōnggào 2025 nián dì 18 hào gōngbù duì bùfèn zhōng zhòng xītǔ xiāngguān wù xiàng shíshī chūkǒu guǎnzhì de juédìng” [The Ministry of Commerce and the General Administration of Customs jointly issued Announcement No. 18 of 2025, announcing the decision to impose export controls on certain medium and heavy rare earth-related items]. April 4, 2025, https://www.mofcom.gov.cn/zwgk/zcfb/art/2025/art_9c2108ccaf754f22a34abab2fedaa944.html accessed on Dec. 1, 2025.
[7] However, many rare earth-related technologies had already been included in the “Catalogue of Technologies Prohibited or Restricted from Export by China.” Ministry of Commerce of the People’s Republic of China, 2023, “Zhōngguó jìnzhǐ chūkǒu xiànzhì chūkǒu jìshù mùlù” [China’s Catalogue of Technologies Prohibited and Restricted from Export]. December 21, 2023, https://images.mofcom.gov.cn/fms/202312/20231221153855374.pdf accessed on Dec. 1, 2025.
[8] Ministry of Commerce of the People’s Republic of China, 2025b, “Shāngwù bù hǎiguān zǒng shǔ gōnggào 2025 nián dì 56 hào gōngbù duì bùfèn xītǔ shèbèi hé yuán fǔliào xiāngguān wù xiàng shíshī chūkǒu guǎnzhì de juédìng” [The Ministry of Commerce and the General Administration of Customs jointly issued Announcement No. 56 of 2025, announcing the decision to impose export controls on certain rare earth equipment and raw materials]. October 9, 2025, https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_864e08035f2c467b81a705d2f61d86d5.html accessed on Dec. 1, 2025; Ministry of Commerce of the People’s Republic of China, 2025c, “Shāngwù bù hǎiguān zǒng shǔ gōnggào 2025 nián dì 57 hào gōngbù duì bùfèn zhōng zhòng xītǔ xiāngguān wù xiàng shíshī chūkǒu guǎnzhì de juédìng” [The Ministry of Commerce and the General Administration of Customs jointly issued Announcement No. 57 of 2025, announcing the decision to impose export controls on certain medium and heavy rare earth-related items]. October 9, 2025, https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_9e392fecdd3e4113b8a9c56984bd88c6.html accessed on Dec. 1, 2025; Ministry of Commerce of the People’s Republic of China, 2025d, “Shāngwù bù gōnggào 2025 dì 61 hào gōngbù duì jìngwài xiāngguān xītǔ wù xiàng shíshī chūkǒu guǎnzhì de juédìng” [Ministry of Commerce Announcement No. 61 of 2025: Decision to Impose Export Controls on Relevant Rare Earth Items from Overseas]. October 9, 2025, https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_65480a162cd745c2b0863d67553a4b05.html accessed on Dec. 1, 2025; Ministry of Commerce of the People’s Republic of China, 2025e, “Shāngwù bù gōnggào 2025 dì 62 hào gōngbù duì xītǔ xiāngguān jìshù shíshī chūkǒu guǎnzhì de juédìng” [Ministry of Commerce Announcement No. 62 of 2025: Decision to Impose Export Controls on Rare Earth-Related Technologies]. October 9, 2025, https://www.mofcom.gov.cn/zcfb/dwmygl/art/2025/art_7c32855cccb4464ca18751400fc177f3.html accessed on Dec. 1, 2025.
[9] Function and Materials, 2025, “Rare Earth Industry Market Trends 2025,” Function and Materials 45(5), May 2025, pp. 54-60.