The devastating cascading effects of China’s blockade of Rare Earths
The only currently active US REE mine, MP Materials, produces light REE and has no heavy REE separation capability, while Lynas USA's facilities will not be expanded until 2027 or later. ( Reuters )
In an interconnected global economy, disruptions in one corner affect every continent, and China's recent export restrictions on rare earth elements (REEs) are a stark reminder of this reality.
Announced as a countermeasure to the US tariffs, these restrictions target seven critical REEs and magnets, blocking shipments around the world due to a licensing system long in the making. This threatens the global supply chain, which has become tightly interconnected in the contemporary era, harming not only the United States but all nations that depend on these materials for the technology, automotive and defense industries. The fragility of the global supply chain was highlighted in 2022, when Russia's attack on Ukraine disrupted supplies of neon and palladium, crippling semiconductor production and causing delays in everything from automobiles to smartphones.
Now, China's decision to block exports of REEs, for which it holds a monopoly (60% of extraction, 90% of processing), threatens a similar cascade effect, as these elements are crucial for the production of magnets used in electric vehicle (EV) motors, wind turbines and smartphone components .
Rare earths on the table of elements
The blockade hits manufacturers in China, Vietnam, Japan and beyond, as Chinese factories also have to prioritize supplies for domestic companies. Vietnam, which is a growing hub for Apple's AirPods, has no REE processing capacity, leaving its factories stranded . This interconnected disruption highlights how no nation is immune when a supply chain falters.
The United States, which imports $170 million of REEs per year, or 0.03% of its trade with China ($557 billion), may appear minimally exposed. However, this figure does not reflect the real impact the measure will have on US companies, which depend on China for 80% of their imports of REEs and 90% of their rare earth magnets. Companies like Tesla, Apple and Lockheed Martin face immediate risks to production. Tesla's factories in Shanghai and the United States depend on Chinese magnetos for electric vehicle motors, and export restrictions could delay production and raise costs, reducing margins or raising consumer prices.
Apple's iPhone production in China and Vietnam faces a shortage of speaker and display components, threatening global supplies. Lockheed Martin, placed on China's export control list, risks missile production delays as heavy rare earths come exclusively from China. These disruptions amplify costs and delays, impacting global markets where U.S. companies are key players.
Everyone has them, no one exploits them
While countries such as Australia, Vietnam and Brazil have REE deposits, it would take years to build the processing plants. The only US REE mine , MP Materials , produces light REEs and does not have the capacity to separate heavy ones, while Lynas USA's facilities will not be expanded until 2027 or later.
Mountain Pass mine, the only active REE mine in the USA
In any case, the long-term outlook offers no remedy for the immediate problem. Supplies may last 60-90 days, but short-term shortages will send prices soaring and halt production.
For consumers, that means more expensive electric vehicles and smartphones; for defense, it risks compromising national security . The trade war, with US tariffs causing China to retaliate, has turned a manageable dependency into a crisis, with all nations caught in the crossfire.
China's licensing system, which collects end-user data, also strengthens its geopolitical influence, potentially targeting U.S. companies' supply chains.
As the world grapples with this shock, the lesson is clear: interconnected supply chains require cooperation, not escalation. Without a doubt, the United States and its allies must accelerate REE diversification, but immediate relief requires an easing of trade tensions.
Otherwise, the global economy will face another painful disruption, proving that in an interconnected world, no one wins when supply chains break down.
However, this is also a one-shot gun for China: once the production cycle of Rare Earths was reopened, with great financial commitment, Beijing's blackmail weapon would be definitively and completely ended. New mines would not close due to the sudden return of Chinese materials to the market. Chaos could happen in 90 days, but it will be a one-off.
Thanks to our Telegram channel you can stay updated on the publication of new Economic Scenarios articles.
The article The devastating cascading effects of China's blockade of Rare Earths comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/i-devastanti-effetti-a-cascata-dl-blocco-delle-terre-rare-dalla-cina/ on Sat, 19 Apr 2025 14:00:31 +0000.