On October 9, 2025, China’s Ministry of Commerce issued new export control regulations on rare earth elements and related technologies, effective December 1, 2025. The rules expand existing restrictions on seven elements to include five additional medium and heavy rare earths—holmium, erbium, thulium, europium and ytterbium—and mandate export licenses for any product containing 0.1 percent or more Chinese-origin rare earth content or produced with specified Chinese processing equipment or technology.[1][2][3]
National Security Rationale and Regulatory Scope
China justifies the expansion on national security grounds, citing the dual-use importance of medium and heavy rare earths in guidance systems, drones, electric vehicles and renewable energy. Exports for military applications face presumptive denials; civilian uses require end-use documentation and supply-chain traceability for licensing approval. The controls apply to:[4][5]
| Category | Coverage |
|---|---|
| Raw materials | Holmium, erbium, thulium, europium, ytterbium plus original seven[3] |
| Permanent magnets | High-performance magnets used in defense and industry[4] |
| Processing equipment | Smelting, separation, refining machinery[2] |
| Downstream products | Semiconductors, AI components, EV motors, even at 0.1 percent value[2] |
These measures assert extraterritorial jurisdiction over foreign-made goods containing Chinese-origin rare earths or utilizing Chinese processing technology, mirroring U.S. “de minimis” and “foreign direct product” rules.[2][6]
Global Reactions and Allied Coordination
The United States, European Union and other democracies condemned the move as economic coercion and pledged counter-measures. U.S. Trade Representative Jamieson Greer labeled it “economic coercion,” while Treasury Secretary Janet Yellen committed to coordinating with G7 partners and allies including Japan, South Korea and India. The EU Trade Commissioner Maroš Šefčovič called for a united response to safeguard European industry.[7][8][9][10]
- India’s automakers report adequate rare earth inventories through year-end but are testing ferrite-based magnets as alternatives.[3]
- Taiwan announced incentives to expand domestic recycling and refining capacities to secure its supply chain.[11]
- Australia fast-tracked discussions on a A$1.2 billion strategic minerals reserve to support non-Chinese rare earth projects.[12][13]
Supply Chain Impact and Market Response
China accounts for roughly 70 percent of global rare earth mining and over 90 percent of permanent magnet processing capacity, making rapid diversification challenging. Establishing large-scale refining and magnet-manufacturing outside China may take three to five years. In the short term, companies face licensing delays and higher compliance costs on intermediate goods containing trace Chinese rare earths.[14][1][3]
Market reaction was swift. Shares of Australian rare earth explorers surged: Resolution Minerals Ltd. rose 56 percent and Nova Minerals Ltd. gained 16 percent on October 14, reflecting investor bets on new supply sources. U.S. rare earth and critical mineral stocks also rallied amid discussion of allied co-investment models.[15][16][12]
Strategic Leverage and Negotiation Dynamics
Analysts compare China’s tactic to U.S. use of the dollar and export controls on advanced technologies. Research fellow Wang Ziyang of the Chinese Academy of Social Sciences described China’s role as evolving from supplier to “governor of the rare earth order,” aimed at deterring future export controls and securing persistent leverage over global supply chains.[17][2]
The measures coincide with pending talks between President Joe Biden and President Xi Jinping. U.S. officials cautioned that failure to rescind or moderate restrictions may accelerate efforts to decouple critical supply chains from China.[8][18]
Outlook and Industry Responses
With a December 1 compliance deadline approaching, companies must:
- Map exposure to Chinese-origin rare earth inputs.
- Prepare license applications with detailed end-use and traceability data.
- Accelerate R&D into recycling technologies and alternative magnet materials.
- Invest in non-Chinese refining capacity or partnerships with Australia, Brazil and other suppliers.[19][20]
Over the long term, defense, automotive, semiconductor and renewable energy sectors will diversify supply, expand domestic recycling and pursue joint ventures to mitigate geopolitical risk.
