China has announced new restrictions on exports of certain rare-earth metals to two U.S. companies central to America’s efforts to develop a domestic rare-earth supply chain, intensifying tensions amid ongoing trade disputes between the world’s two largest economies. These restrictions, imposed by China’s Ministry of Commerce, target materials essential for manufacturing a wide range of products, including electric vehicles and military drones.

China dominates the global market for rare-earth elements, controlling approximately 90 percent of the world’s supply of light rare earths, used in oil refining, glass polishing, and magnet production, as well as more than 98 percent of heavy rare earths, which play a critical role in high-tech applications such as artificial intelligence chips, lasers, and advanced magnets. Since April 2025, Beijing has restricted exports of seven rare-earth elements, most of them heavy rare earths, as part of export controls classifying the materials as dual-use goods with civilian and military applications. These measures have already disrupted international production chains for automotive, robotics, and defense sectors.

The recent restrictions cut off shipments of dysprosium—a vital heavy rare earth used in heat-resistant magnets for automotive systems like power seats and steering—from China to the United States. According to Chinese customs data, dysprosium exports to the U.S. ceased in April 2025. China has also largely halted shipments of terbium, a more costly substitute heavy rare earth, with only a single six-metric-ton shipment detected in October 2025, coinciding with a summit between President Donald Trump and Chinese President Xi Jinping in South Korea.

The tightening comes after several high-level summits failed to produce a resolution. Following a meeting in South Korea last October, President Trump indicated that China had agreed to resume rare-earth supplies to the United States as needed, but Chinese officials never publicly confirmed such an agreement. A follow-up summit in Beijing last month yielded no new progress on rare-earth trade.

The Group of Seven (G7) industrialized nations recently pledged to reduce dependence on any single supplier, aiming to ensure that no more than 60 percent of rare-earth imports come from one country by 2030. This is part of a broader global push to diversify supply sources and mitigate risks associated with China’s near-monopoly.

U.S. companies like MP Materials and USA Rare Earth are in the process of reviving domestic production capabilities, including restoring magnet manufacturing infrastructure and acquiring foreign rare-earth operations. For instance, USA Rare Earth is poised to finalize a takeover of Brazil’s Serra Verde, which has begun producing dysprosium in limited quantities, and Australian firm Lynas has initiated small-scale production but remains far below the volumes required by American manufacturers.

Industry representatives report significant challenges in securing critical rare-earth materials. Wade Seitz, president of Advanced Magnet Lab in Florida, noted severe shortages of dysprosium for magnet production, with his company relying on recycled supplies from Europe. While some manufacturers employ grain boundary diffusion techniques to reduce reliance on dysprosium and terbium, these methods cannot fully compensate for the scarcity of Chinese exports.

Adding to concerns, China has announced plans to implement even stricter global rare-earth export controls beginning in November, potentially further restricting the international availability of these essential materials. The move underscores Beijing’s willingness to leverage its dominant position in rare-earth supply as a strategic tool amid broader geopolitical and trade disputes.