China’s latest export restrictions on rare earth elements threaten to deepen US supply chain vulnerabilities, with the country’s military production capabilities facing particular risk, according to a new report by the Center for Strategic and International Studies (CSIS).
On April 4, Beijing announced new controls on the export of seven key rare earth elements (REEs) — samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium — all essential to defence, energy, and automotive technologies. Chinese exporters will now be required to apply for special licenses to ship these materials abroad, and 16 US defence and aerospace firms have been blacklisted from receiving “dual-use goods,” including these REEs.
Although the new measures fall short of a full ban, CSIS, in a report released Monday, warns the licensing system will likely result in a temporary halt in exports and significant disruption to US firms reliant on rare earth inputs. Early evidence suggests a pause in shipments is already underway.
Rare earths as strategic leverage
The restricted elements are all medium and heavy rare earths — materials that the US does not currently produce or process at commercial scale. CSIS highlights that the United States is particularly exposed here: China has held an effective monopoly on heavy REE processing since Vietnam’s only alternative refinery shut down last year due to a tax dispute.
These materials are integral to advanced weapons systems, including F-35 fighter jets, Tomahawk missiles, Virginia-class submarines, and radar and guidance systems. For example, an F-35 contains over 900 pounds of rare earths. A DDG-51 Arleigh Burke-class destroyer requires around 5,200 pounds, and a Virginia-class submarine uses roughly 9,200 pounds.
“Further bans on critical minerals inputs will only widen the gap,” CSIS wrote, noting that China is acquiring advanced military technology five to six times faster than the US.
US industry far from ready to respond
The US Department of Defense has committed over US$439 million since 2020 to build out a full “mine-to-magnet” rare earth supply chain, with a 2027 target for domestic self-sufficiency. Key investments include funding for MP Materials’ facilities at Mountain Pass and Fort Worth, as well as support for Lynas Rare Earths’ US subsidiary.
However, current production levels are a fraction of what China can supply. In 2024, MP Materials produced 1,300 tonnes of neodymium-praseodymium (NdPr) oxide. China, by contrast, produced an estimated 300,000 tonnes of neodymium-boron-iron (NdFeB) magnets — the dominant end-use product for these materials.
“There is no heavy rare earth separation happening in the United States at present,” CSIS noted. The development of commercial-scale capabilities is still years away, and US firms are only beginning to produce high-purity samples in laboratory settings.
Gracelin Baskaran, a co-author of the CSIS report, added that it’s not just a capital challenge: “It’s a know-how problem.” Many REE processing steps, such as solvent extraction, are complex and have historically been concentrated in China, where expertise is far more advanced.
A long runway of warnings
The report emphasises that the US had ample warning. China has previously used rare earths as a geopolitical tool — most notably in 2010, when it cut off exports to Japan during a diplomatic dispute. Since 2023, it has gradually imposed restrictions on other critical minerals, including gallium, germanium, graphite, and tungsten.
In late 2023, Beijing also banned the export of REE separation and magnet-making technologies — a move that further hinders foreign competitors from catching up.
While the US has made recent strides, CSIS concludes the country remains years away from building an independent rare earths supply chain — and even further from rivalling China’s dominance.
Global implications and limited alternatives
Efforts are underway in countries like Australia, Brazil, Japan, Vietnam, and South Africa to diversify rare earth supply. Australia’s Browns Range project, for example, is targeting commercial-scale dysprosium production outside China. Japan has a long-running R&D partnership with Vietnam, and Australia’s Lynas remains the largest producer of separated REEs outside China.
Still, CSIS warns that many of these countries rely on China for refining, and most alternative initiatives remain early-stage.
“There are parts of the rare-earths supply chain that we never actually learned how to do,” said Baskaran. “We’re doing this in parallel — constructing infrastructure while trying to learn the technical processes.”
In the meantime, countries may be incentivised to work with China — rather than against it — to avoid supply disruptions. “China’s new export licensing system could be a strategic lever to pull countries closer,” the report says.
A fractured economic future
Neil Shearing of Capital Economics noted that controls on rare earths and critical minerals have become central to Beijing’s geopolitical toolkit. In his view, this is part of a broader trend toward “weaponising” control over strategic resources — with the race to secure alternative supply chains set to define the next era of global economic competition.
As Baskaran put it: “We’ve had a long runway, and our inaction is ultimately giving China very, very powerful currency at the negotiating table.”
