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China swiftly retaliated to the U.S.’s imposition of 34% tariffs with new export controls targeting critical minerals important for the American defense sector.
Two days after U.S. President Donald Trump announced 34% tariffs on Chinese products, Beijing retaliated with new controls on critical mineral exports, targeting the American defense-industrial base as well as matching levies on U.S. imports.
Effective immediately, China will require special licenses for the export to the U.S. of seven medium and heavy rare-earth elements: dysprosium, gadolinium, lutetium, samarium, scandium, terbium and yttrium.
China’s Ministry of Commerce said in a statement it imposed the export curbs “to better safeguard national security and interests and to fulfill international obligations such as non-proliferation.”
Beijing’s choice of minerals was calibrated carefully. The U.S. is highly dependent on China for the metals and lacks the ability to produce them at scale domestically, even in cases when there are significant domestic deposits.
“This is a precision strike by China against Pentagon supply chains that enable our most powerful weapons and defense systems,” said Mark Smith, CEO of NioCorp, a company developing a critical minerals project in Nebraska.
At the same time, Beijing is applying direct pressure to the defense sector’s permanent magnet supply chain. Terbium, for instance, adds temperature resiliency to neodymium iron boron magnets. The magnets have crucial defense applications including missile guidance and control systems, satellite communications and radar systems. Lockheed Martin’s F-35 Lightning II aircraft, General Atomics’ Predator drones and RTX’s Tomahawk missiles all use rare-earth magnets. The magnets are also essential components of Virginia- and Columbia-class submarines.
Terbium is one of the hardest rare earths to source, making up less than 1% of most deposits, according to the Pentagon. Because of its scarcity, extraction is costly.
China produces nearly 100% of the world’s dysprosium. It is used to enhance the properties of neodymium magnets, making them resistant to demagnetization at high temperatures. Dysprosium’s heat resistance makes it a crucial component of advanced semiconductors as well. The element enhances the properties of neodymium magnets, making them resistant to demagnetization at high temperatures.
By curbing gadolinium exports to the U.S., China disrupts the aircraft engine supply chain. Gadolinium is used to enhance the mechanical properties of alloys in turbine blades and other engine components.
Rare-earth supplier Stanford Advanced Materials notes that gadolinium may have additional applications in space exploration. “Its ability to absorb neutrons and gamma rays makes it an ideal material for protecting spacecraft and satellites from the harmful effects of cosmic radiation,” the company says in a research note.
Beijing’s latest critical mineral export controls come as the U.S. effort to reduce reliance on China for the strategic metals kicks into high gear. Trump issued an executive order on March 20 invoking the Defense Production Act to boost domestic production. The order requires that Pentagon investment authorities and the Department of Defense Office of Strategic Capital establish a dedicated mineral production fund for domestic investments carried out by the United States International Development Finance Corp. (DFC).
U.S. Sen. Jim Risch (R-Idaho) said in an April 3 opinion piece published by Newsweek that the U.S. has become too reliant on foreign sources of minerals, China in particular. “The executive order “provides a much-needed opportunity to reverse this troubling trajectory, better leverage our domestic natural resources and achieve self-sufficiency,” Risch wrote. he said.
Yet self-sufficiency could be elusive, given the constraints the U.S. faces.
The Trump administration has tacitly recognized that issue by exempting critical minerals from the sweeping tariffs it imposed this week on nearly all U.S. trading partners.
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