[By Guancha Observer, Wang Yi] "After the United States and China mutually suspended tariffs, rare earth exports have become a focal point," Fortune magazine reported on May 12, noting that the U.S. hopes to maintain access to Chinese rare earth resources, while China views its dominant position in the rare earth sector as a 'weapon' that can be used to counter American threats, making this issue one of the most delicate parts of their economic and trade agreement.

After two days of negotiations, the two countries issued a joint statement on May 12, agreeing to reduce tariffs within 90 days, cutting rates by 115%. In the statement, China also promised to "take necessary measures to suspend or cancel non-tariff countermeasures against the U.S. starting from April 2, 2025," but did not specify which measures would be suspended or canceled.

This has led the U.S., which is looking forward to Chinese rare earth supplies, to begin discussing whether China will loosen its export controls.

"Dominating this field may be one of China's most important means of exerting influence over the U.S.," said Dexter Roberts, a non-resident senior fellow at the Atlantic Council, who believes China is unlikely to ease export controls. "They are using rare earth export restrictions to punish the U.S., and they won't discard this part of their economic arsenal."

Rare earth materials waiting for export in Lianyungang, Jiangsu Province - Reuters

China holds absolute dominance in the rare earth market, with related data showing that approximately 60% of the world's rare earth materials are mined in China, and nearly 90% are refined and processed in China before being shipped worldwide.

Of course, this includes the U.S. The New York Times noted on April 16 that among the 50 critical minerals listed by the U.S. Geological Survey, more than half of America’s critical minerals come from China, including 17 rare earth elements. Many of these rare earth elements possess heat-resistant chemical properties and are often used to manufacture high-quality magnets, glass, lighting, batteries, and other products, and are even key raw materials for military equipment such as F-35 fighter jets, submarines, missiles, and radar systems.

This makes rare earth materials a "trump card" that China can play in this round of the trade war. After Trump initiated a full-scale tariff war on April 2, China swiftly responded with "11 arrows" on April 4, including export control measures for seven categories of heavy rare earth-related items such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.

Foreign media interpreted at the time that China was establishing an export licensing system; companies wishing to purchase Chinese rare earths must first apply for an export license. Tesla was one of the first companies to apply for this license, as they need rare earths to produce batteries for electric vehicles. Musk also mentioned on the Tesla earnings call on April 22 that the production of their humanoid robot, Optimus, had been affected by China's export restrictions on rare earth magnets. They are in communication with China to seek approval for the use of rare earth magnets.

Several rare earth elements - Reuters

Following the Geneva joint statement on economic and trade talks issued by both sides on May 12, U.S. companies are closely watching whether there might be changes in rare earth export control measures. According to sources cited by Reuters, China is unlikely to completely abolish export controls.

Woodck Joerg Wuttke, partner at consulting firm DGA-Albright Stonebridge Group and a China trade expert, stated that the Chinese do not want to cut ties with the U.S., but they want to use this to pressure the U.S.

Roberts also believes China will not mind using rare earths to counter the U.S. He said, "I don't think China really worries that if they take too tough a stance, they will suddenly lose influence in the rare earth market," "I don't think so."

The recent crackdown on the illegal smuggling of strategic minerals in China seems to suggest that future export controls will not be easily relaxed. A spokesperson for the Ministry of Commerce answered questions from reporters on the 12th, stating that since China implemented export controls on certain strategic minerals, some foreign entities have colluded with lawbreakers inside China to attempt to evade export control measures through smuggling and other means. To curb such trends, the National Export Control Coordination Mechanism Office held a field meeting in Shenzhen, Guangdong Province, on May 9, focusing on cracking down on the illegal smuggling of strategic minerals, and made special arrangements. There will be a series of actions organized soon.

The field meeting further clarified the tasks of relevant departments such as the Ministry of Commerce, the Ministry of Public Security, the State Security Bureau, the General Administration of Customs, and the State Post Bureau in this special operation, requiring all relevant departments to strengthen law enforcement cooperation, severely crack down on the illegal smuggling of strategic minerals, create a high-pressure situation of "joint management," and take practical and effective measures to prevent the illegal outflow of strategic minerals.

Under China's export controls, Fortune magazine points out that the U.S. hopes to maintain stable rare earth ore exports and is also starting to look for other rare earth sources, such as Greenland and Ukraine. However, their mining levels do not match China's, and mining rare earth elements is costly, making it difficult to proceed. Additionally, mineral agreements between the U.S. and its allies require time for negotiation and implementation. Data from S&P Global shows that building a new mine takes an average of 18 years to become operational, which makes all U.S. efforts mid-term or long-term goals.

Moreover, compared to China, the U.S. also lags behind in terms of separation and processing technology for rare earth elements. The Center for Strategic and International Studies (CSIS) in its report analyzed that the U.S. currently lacks the capability to separate heavy rare earths, and these technologies are still developing in the U.S.

In January 2025, an American company produced a sample of dysprosium oxide with a purity of 99.1%, using ores from Texas and processing them at a research facility in Colorado. This was hailed by the American rare earth industry as a "breakthrough in the domestic rare earth industry." However, CSIS stated that much work remains to be done to convert laboratory samples into commercial products, "developing mining and processing capabilities requires long-term efforts, meaning that in the foreseeable future, the U.S. will remain at a disadvantage."

Fortune concluded that all of this means the most likely outcome is further reconciliation with China—no matter how difficult it may be.

This article is an exclusive contribution by the Guancha Observer and cannot be reprinted without permission.

Original source: https://www.toutiao.com/article/7503851319992615461/

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