China plans to block rare earth sales to the US military

China plans to block the sale of rare earth elements to the US military. The Chinese government has decided to leverage its agreement with US President Donald Trump on lifting export restrictions to its advantage.

Beijing will resume the export of rare earth elements to the US but is working on a system to prevent these metals from reaching weapons manufacturers.

According to a report by The Wall Street Journal, citing sources familiar with the matter, the export control rules being prepared will require suppliers to identify and verify the end-users. This will allow Chinese authorities to prevent the sale of strategically important materials to representatives of the American defense industry.

However, such strict controls could also make it difficult for automotive and aerospace companies, which engage in both civilian and military production, to import certain metals from China.

Crucial for everything from missiles to fighter jets

Rare earth elements are used in every area of modern technology, from smartphones and medical devices to electric and conventional automobiles and weapons. These metals also play a vital role in missiles, radar systems, submarines, and fighter jets.

Following his meeting with Chinese President Xi Jinping at the end of October, Trump announced that Beijing’s issuance of general export licenses would effectively end the restrictions on rare earth elements. These restrictions were imposed in retaliation for the trade war initiated by Trump. However, The Wall Street Journal reported that Chinese officials intend to maintain some of these limitations.

According to the newspaper’s sources, Beijing’s plan could still change, and the final form of the licensing system has not yet been determined.

The model will be based on the US’s own inspection system

The verified end-user system, like much of China’s overall export control mechanism, is planned to be established based on American procedures.

These rules, in effect in the US since 2007, allow certain Chinese companies to purchase strategically important products under a general license without needing separate permits for each purchase.

This system facilitates the import of controlled goods such as chemicals or microchip manufacturing equipment.

However, it requires companies to verify their compliance by allowing inspections from regulatory agencies during this process.

A new move in the trade war

China accounts for approximately 60% of global rare earth element production and over 90% of its refining.

In December 2024, one day after the Joe Biden administration announced new computer chip export restrictions on China, Beijing halted shipments of gallium, germanium, and antimony to the US.

In April, after Donald Trump imposed tariffs of up to 145% on products imported from China, Beijing introduced a licensing requirement for the export of seven rare earth elements and their associated magnets used in the automotive, weapons, and electronics industries. This decision led to a temporary halt in production for American automakers.

Shipments resumed after Trump lowered the tariffs and declared a trade truce.

However, in response to new restrictions on semiconductor exports imposed by Washington early last month, Beijing implemented a global licensing regime for nearly all rare earth elements and their production technologies.

Trump threatened tariffs of 100%, but in a meeting with Xi Jinping two days before they were to take effect, he agreed to a one-year suspension of last month’s restrictions.

Meanwhile, Chinese and American negotiators plan to move from a trade truce to a more comprehensive agreement.