JAKARTA – President Xi Jinping’s administration has deployed one of its key economic weapons: near-total control over the global supply of rare earth elements, which are critical to a wide array of advanced technology and military industries.

This has rattled the White House, as rare earth elements are essential for manufacturing electric vehicles, computer chips, and defence systems such as the F-35 fighter jet and nuclear submarines.

China produces about 61% of the world’s rare earth elements. More significantly, it refines and processes 92% of global supply, according to the International Energy Agency (IEA).

“Critical minerals are one of China’s strongest bargaining chips against Washington,” said Matilda Buchan, senior analyst at Asia House, a London-based policy think tank, as quoted by The Telegraph on Thursday (5/6).

Tensions escalated after Donald Trump announced a steep rise in tariffs on Chinese imports, peaking at 145% in early April.

In retaliation, on 4 April 2025 China banned exports of magnet alloys containing seven key rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, yttrium, and scandium—to the US.

On 9 May, auto giants including General Motors, Toyota, Volkswagen, and Hyundai sent a warning letter to the White House, stating that production could grind to a halt if Chinese supplies were not resumed quickly.

That same night, Trump posted on Truth Social that he was ready to make major concessions to reach a deal. Intense negotiations followed over the weekend (12/5) in Geneva, resulting in a tariff reduction and a discreet easing of China’s embargo.

However, exports of rare earth elements have yet to resume fully.

“We haven’t seen the flow of supplies that should have started already,” said Trump’s Trade Envoy, Jamieson Greer, in an interview with CNBC (4/6).

He accused Beijing of deliberately delaying export licence approvals.

David Merriman, Research Director at Project Blue, a critical minerals consultancy, said the slowdown is largely due to China’s new administrative process requiring export licences for materials containing more than 0.1% of certain elements.

“The average processing time is about 45 days,” he explained.

Michael Hart of the American Chamber of Commerce in China confirmed that some export permits have been issued, but not enough to meet industrial demand.

Jens Eskelund, President of the European Union Chamber of Commerce in China, told the New York Times: “Factories could soon shut down. Supply remains heavily disrupted.”

Meanwhile, Trump has tried to strike back with a tech offensive by tightening export controls on chips and related software to China, particularly in areas involving artificial intelligence (AI).

US Commerce Secretary Howard Lutnick described the move as an attempt to show China “what it feels like to be restricted.” In response, China’s Ministry of Commerce accused the US of unilaterally provoking new economic friction.

On the other hand, US efforts to secure alternative sources of rare earth elements—from Ukraine to Greenland—remain far from realisation. According to IEA estimates, China is still expected to control 85% of processed rare earth production for the next decade.

“The further downstream you go in the supply chain, the stronger China’s dominance becomes,” said David Merriman, Research Director of Project Blue. (EF/ZH)