China flexes rare earths power as it allows some export permits

China demonstrated its ability to manage rare earth flows as part of its trade dispute with the US, showing that it will allow some rare earth exports as part of a detente with the Trump administration, analysts and market participants told Platts, part of Commodity Insights.

The US and China on May 12 agreed to lower the temperature of their trade dispute by reducing tariffs: The US slashed its 145% import fee to 30%, and China reduced its tariff from 125% to 10%. Beijing further pledged to suspend or remove some non-tariff countermeasures taken against the US since April 2, without specifying which measures it would drop, according to a joint statement from the two countries.

Rare earth producers Lynas Rare Earths and MP Materials both said in earnings calls that China halted rare earth shipments during the dispute. However, China granted some permits for rare earth exports on May 14, according to Reuters, showing its control of the market.

But even as the two sides came to an agreement, China left in place its requirement that rare earth exports get a permit, allowing it to cut off supplies at any time.

"I would expect China to keep the export controls intact now that they are in place to use, if necessary, in the future, and to ensure rare earths and rare earth magnets are not used in our defense industry," Joshua Ballard, CEO at USA Rare Earth Inc. told Platts. USA Rare Earth is developing the Round Top rare earth project in Texas.

"They are also gaining a lot of information about our customer end uses and designs through this process, even if they approve the exports. We'll see what happens over the next 90 days."

While China said that it was removing non-tariff barriers against the US to allow for further negotiations, it did not specifically address restrictions on the rare earths exports, which applied to all countries, not just the US.

"Based on a strict reading of the text, there's technically a loophole: since the measures weren't directed specifically at the US, China may not be legally required to lift them under this provision. This is different from, say, the export bans on antimony, germanium, or gallium, which were clearly targeted at the United States — if a similar action had occurred after April 2, China would likely be obligated to suspend or remove it," Mahnaz Khan, vice president of policy, critical minerals supply chains at Silverado Policy Accelerator, a bipartisan think tank, told Platts.

China has not just tightened its grip on rare earths. On Dec. 3, 2024, the country "banned exports of "dual-use" materials — those with military and civilian uses such as gallium, germanium, and antimony — to the US and tightened export controls on synthetic and natural graphite. The restrictions led to "acute" shortages of the materials, according to US end-users in March.

US industry needed relief

No magnets containing medium and heavy rare earths have left China since the April 4 announcement of export controls, according to US-based MP Materials and Australia's Lynas, the two leading producers and processors of rare earth elements, during their earnings calls days before the tariff pause.

The rare earths system, as it existed, has been broken, and the US government no longer considers China-based supply chains as a reliable option, James Litinsky, CEO of MP Materials Corp., said on the company's May 8 earnings call.

The company ceased all shipments of rare earth concentrate to China on April 18 due to China's 125% tariff on US goods. MP Materials did not respond to a request for comment on the China-US deal.

China's easing of export restrictions would be a "short-term win and a much-needed pressure release valve" for the US industry, according to Ashley Zumwalt-Forbes, a principal at Smoketree Resources and a former deputy director for batteries and critical minerals at the US Department of Energy.

"But don't mistake it for a change of heart. It's a pause, not a pivot, and we're still dangerously exposed," Zumwalt-Forbes wrote in a LinkedIn post on May 12. "We needed relief because we don't have alternatives. But that's exactly why we can't take our foot off the gas."