China Keeps Rare Earth Pressure on Washington After Trump Summit
- Trump’s Beijing summit produced business deals and temporary diplomatic easing, but failed to secure a long-term rollback of China’s rare earth export restrictions.
- China continues to dominate heavy rare earth supply, with exports of key materials like dysprosium, terbium, and yttrium still heavily restricted.
- The U.S. and Europe are accelerating efforts to build independent rare earth supply chains through major investments in domestic mining, processing, recycling, and magnet production.
Two weeks ago, U.S. President Donald Trump paid a visit to Beijing for a high-level summit with Chinese leader Xi Jinping, with a view to stabilizing bilateral trade, securing new business deals, and seeking China's diplomatic leverage to help manage the conflict in Iran. Trump traveled with a delegation of high-level American CEOs to encourage China to open its markets to U.S. tech companies, and managed to secure several multibillion-dollar deals. The summit yielded a modest tactical detente and improved diplomatic normalcy between the two rival powers, with the White House reporting that Xi remains opposed to the militarization of the Strait of Hormuz. However, Trump’s visit had a glaring failure: the discussions in Beijing did not result in a formal agreement or long-term trade truce concerning China’s easing of rare earths export restrictions.
Still, China “can ground America’s drone fleet with a single phone call”, according to an opinion piece this week in American military publication Stars and Stripes. Back in November, Beijing reaffirmed that broad export restrictions introduced earlier, such as the outright bans on rare earth extraction/separation technology and the specific volume controls on select critical minerals like tungsten, bismuth, antimony, as well as various medium- to heavy-rare-earth elements, remain fully in effect. China did pause the sweeping, second-wave controls that had mandated export licenses for foreign entities and products containing trace amounts of Chinese-origin rare earth materials, it had announced in October 2025–but only for one year.
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And now, an analysis by Fitch Group's BMI Research notes that Xi’s team only promised to address U.S. supply shortage concerns without providing concrete structural extensions or policy adjustments during the latest meeting.
Chinese shipments of highly critical "heavy" rare earths remain drastically suppressed despite the one-year respite, with dysprosium, terbium, and yttrium exports currently running at just 41%, 49%, and 42% of pre-restriction levels, respectively. Worryingly, the price of yttrium has skyrocketed 15-fold due to acute shortages stemming from China's export rules, triggering severe disruptions across the U.S. aerospace and semiconductor industries where the mineral acts as a vital protective and thermal coating. China accounts for ~70% of U.S.’ yttrium supply, as well as 100% of its terbium, holmium, and lutetium.
China’s rare earths hegemony has sent the United States and its Western peers scrambling for alternative supplies.
Back in July, the U.S. Department of Defense (DoD) agreed to purchase $400 million in preferred stock in MP Materials (NYSE:MP), making the Pentagon the company's largest shareholder with an equity stake of roughly 15%. The agreement includes a 10-year offtake contract with a price floor, ensuring that MP Materials' output goes directly to defense and commercial customers to secure domestic supply chain independence. MP Materials is utilizing this capital and an additional $1 billion in commercial debt from JPMorgan Chase and Goldman Sachs to build the "10X Facility," a massive rare earth magnet manufacturing campus located in Northlake, Texas.
Around the same time, USA Rare Earth (NYSE:USAR) signed a non-binding Letter of Intent (LOI) with the U.S. Department of Commerce to access $1.6 billion in government funding, which will be drawn from a finance facility created under the CHIPS and Science Act. The funding package consists of a proposed $1.3 billion senior secured loan and $277 million in federal funding. The company will also issue a 10% equity stake (and warrants for additional shares) to the U.S. government. The investment will fast-track the mining, processing, and refining of heavy rare earth elements at their Round Top deposit in Sierra Blanca, Texas, with commercial production anticipated to begin in 2028.
REalloys (NASDAQ:ALOY) is also positioning itself within the emerging Western rare earth supply chain through a series of agreements tied to heavy rare earth processing and metallization capacity in North America. The company has secured long-term supply agreements with the Saskatchewan Research Council (SRC) for neodymium-praseodymium (NdPr), dysprosium, and terbium output, while funding upgrades to SRC’s processing facility in Saskatoon and developing a heavy rare earth metallization platform in Ohio focused on producing defense-grade metals and alloys. REalloys has also signed feedstock agreements tied to the Tanbreez project in Greenland and the Sheep Creek rare earth deposit in Montana as part of a broader mine-to-magnet strategy targeting U.S. defense and industrial markets.
Meanwhile, Europe is bypassing China's near-monopoly on rare earths through the Critical Raw Materials Act (CRMA), which caps single-country dependency. The bloc is investing heavily in domestic extraction, processing, and recycling, shortlisting strategic projects and signing resource partnerships with Western-allied nations. Recognizing the vulnerability of supply chains, the European Commission is implementing coordinated defense strategies through initiatives such as RESourceEU Action Plan, an initiative backed by up to €3 billion in funding that coordinates demand aggregation, supply stress tests, and the joint purchasing of critical minerals among member states. The CRMA also mandates that at least 25% of the EU's strategic raw materials come from recycled waste by 2030.
European automakers and tech manufacturers are also increasingly designing products that bypass rare earths altogether. For instance, manufacturers are pivoting to magnet-free motors, including synchronous reluctance motors and induction motors, which eliminate the need for neodymium-based permanent magnets in electric vehicles.
By Alex Kimani for Oilprice.com
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