China has agreed to ease some of its most recent restrictions on critical mineral exports, but not all of them.
Following a meeting between President Trump and Chinese leader Xi Jinping on Thursday, China’s Ministry of Commerce announced it would suspend for one year the export controls it introduced on October 9th.
Crucially, China did not publicly commit to withdrawing earlier, more severe restrictions implemented last spring and winter, which are still causing significant disruptions to global supply chains.
The October orders, described by U.S. Treasury Secretary Scott Bessent as “a bazooka at the supply chains and the industrial base of the entire free world,” included a ban on exporting technology or equipment that could help other nations establish their own rare earth mines, refineries, and magnet factories, unless specifically permitted by China’s commerce ministry.
President Trump stated on Thursday, after his meeting with Mr. Xi in Busan, South Korea, that he anticipated this year-long suspension would be extended beyond its expiration.
However, China’s commerce ministry simply indicated its intention to “study and refine” its October 9th regulations, which have faced considerable criticism from both Europe and the United States for their broad and vague nature.
Perhaps more significantly, the ministry offered no public assurance that it would reverse the strict export control rules on critical minerals that were imposed in April and last December.
The April regulations halted the export of seven types of rare earth metals and the magnets made from them, requiring special licenses from the ministry. Similar requirements were put in place in December for two metallic elements essential for certain semiconductors and two other elements crucial for military ammunition production.
European and American business leaders and officials report that only half their applications for rare earth magnet export licenses are being approved. Many factories are struggling to receive enough supplies from China to maintain operations, with some experiencing temporary shutdowns.
The European Union Chamber of Commerce in China expressed concern last month, stating that these export controls are “putting the stability of global supply chains at stake.”
Manufacturers relying on these magnets for products like car brakes and seats have been unable to replenish their usual inventories. Companies depleted their reserves when the ministry granted very few licenses during the initial two months after the April regulations were announced, as it worked to establish new licensing procedures.
These shortages have caused the price of rare earths to skyrocket. Thomas Kruemmer, a rare earths consultant based in Singapore, noted that the price of dysprosium, vital for heat-resistant magnets in automotive systems, has surged outside China by at least sixfold, reaching $1,200 per kilogram.
China’s decision to temporarily suspend the October rules might suggest an earlier underestimation of the severe impact these measures would have on Western industrial bases and its own reputation as a dependable supplier.
“My impression is that they had no idea just how many products would be affected by this licensing system,” Mr. Kruemmer commented.
The implications of Thursday’s agreement between China and the United States for Europe remain uncertain. European Union trade officials were scheduled to meet with a Chinese delegation in Brussels on Friday.
China has reportedly been withholding rare earth magnets from Europe, demanding in return that Europe reduce its tariffs on Chinese electric vehicles.
In response, Western nations are now making substantial investments to reduce their reliance on China for rare earths. However, the United States currently lacks the capacity to rapidly increase its production of rare earth magnets.
Sabrin Chowdhury, head of commodities at BMI, a Fitch Group company specializing in country risk and industry analysis, stated that it could take a decade for the United States to establish a fully independent supply chain for rare earth magnets and other related materials.
A further concern is whether China will truly permit the export of rare earth processing equipment, which is essential for Western countries to build their own supply chains. According to rare earth industry executives, many Chinese equipment manufacturers ceased exports earlier this year due to administrative directives from Beijing, even before new formal regulations were in place.
Whether these critical shipments will resume following the suspension of the October rules “remains to be seen,” Ms. Chowdhury concluded.