China’s pledge to choke off shipments of rare earth elements could wreak havoc on tech giants like Apple and Tesla as well as big US military contractors – and experts called it a major bargaining chip as Beijing haggles with President Trump over tariffs.
US companies and investors alike are scrambling to assess the impact of Beijing’s announcement that foreign entities must obtain special licenses beginning Dec. 1 to export products containing more than 0.1% of rare earth metals and magnets originating in China.
Stocks rallied on Monday after Trump said relations with China will be “fine” despite the latest dustup. The rebound occurred after Trump’s announcement of a 100% retaliatory tariff on Chinese goods starting Nov. 1 triggered the largest single-day selloff in six months last Friday.
Shares of US-based rare earth mining companies USA Rare Earth, Critical Metals and MP Materials all surged 20% or more on Monday.
China will have “significant discretion to delay, deny, or condition exports” involving advanced technology, according to Gracelin Baskaran, director of the Critical Minerals Security Program at CSIS. The critical minerals are needed to build iPhones, electric cars, drone motors, F-35 fighter jets and Tomahawk missiles.
“The move both strengthens Beijing’s leverage in upcoming talks while also undercutting US efforts to bolster its industrial base,” Baskaran said in a blog post.
It’s unclear how China plans to enforce the rules as US firms scramble to understand how to obtain export licenses and comply with their extreme requirements. Experts have warned for months that those supply chain hiccups will lead to higher prices for Americans buying tech gadgets.
Any license applications for products with military uses are likely to be rejected, China’s Commerce Ministry said. Licenses related to artificial intelligence products and chip production will be reviewed on a case-by-case basis.
Mark A. Smith, the CEO of Nebraska-based rare earths mining firm NioCorp, said he doubts Beijing will give up its strategic leverage even if trade talks go well.
“I don’t see China negotiating away the dual use export control regime they have put into place for heavy rare earths,” Smith told The Post. “They will say nice things about this not being a ban on rare earth exports, and they will sound accommodating.
“But the People’s Liberation Army will almost certainly ensure that export licenses that could possibly allow [rare earths] to make their way into defense technologies won’t see the light of day,” Smith said.
China, which controls about 70% of global rare earth mining and about 90% of processing capabilities, has steadily cut off access in recent years amid rising tensions with the West.
In April, China snarled worldwide shipments and left Western companies scrambling after it abruptly announced a separate set of licensing requirements on rare earth magnets.
Meanwhile, the US has imposed restrictions on sales of advanced computer chips, such as those sold by Nvidia, due to national security concerns.
As The Post reported, many experts fear that China could implement a total embargo if diplomatic tensions take a more serious turn – such as in the event of an invasion of Taiwan.
Aside from its shipment restrictions, China said it would limit exports of technologies related to mining, smelting, recycling and magnet-making – making it more difficult for the US and other countries to ramp up domestic production.
The rules were announced just weeks before Trump and Chinese President Xi Jinping are set to meet on the sidelines of the Asia-Pacific Economic Cooperation forum in South Korea. Trump has threatened to cancel that meeting.
“China’s latest round of export-rule tightening underscores what manufacturers have long known: The US must increase and fortify its domestic critical minerals supply,” said Michael Davin, director of energy and resources policy at the National Association of Manufacturers.
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