China Pauses Rare Earth Controls, Easing Supply Fears for US Tech, Defense
Beijing's expected one-year delay on a new export licensing regime provides temporary relief for critical U.S. supply chains for EVs, military hardware, and electronics.
U.S. technology, defense, and electric vehicle manufacturers are breathing a sigh of relief after China signaled its intent to delay a strict new export licensing regime for rare earth minerals and magnets by one year. The anticipated pause, part of a broader tentative trade framework, averts a near-term crisis for industries heavily dependent on Beijing for the world's most critical minerals.
The delay was reported by U.S. Treasury Secretary Scott Bessent following trade negotiations and represents a significant de-escalation in a brewing resource conflict. The licensing system, originally slated to take effect in the final months of 2025, would have given Beijing granular control over the export of materials essential for everything from F-35 fighter jets to Tesla's electric motors and iPhone components.
Rare earth elements (REEs) are a group of 17 minerals vital for high-performance magnets and sophisticated electronics. China's longstanding dominance of the sector is stark; it controls an estimated 85% to 90% of global rare earth processing, giving it immense leverage over global supply chains. This strategic vulnerability for the West is not theoretical. In April 2025, earlier Chinese export restrictions caused shipments of rare earth magnets to plummet by 75%, halting some auto production lines.
The strategic stakes are particularly high for the U.S. military. A single F-35 fighter jet requires approximately 920 pounds of rare earth materials, while a Virginia-class submarine uses over nine tons. This dependency has spurred a concerted, albeit long-term, effort by the Pentagon to onshore production. Since 2020, the Department of Defense has invested over $439 million to help build out domestic supply chains, including significant funding for MP Materials, the owner of the only major U.S. rare earths mine.
For the technology and automotive sectors, the delay provides critical breathing room. The rapid expansion of the electric vehicle market, where REEs are crucial for powerful and efficient motors, has tightened demand. The one-year pause allows companies to secure inventory and continue diversifying their supply chains without the immediate threat of a government-mandated stoppage from their primary supplier.
This move by Beijing is seen by analysts as a tactical concession amid its own economic challenges and a desire to stabilize its trade relationship with Washington. However, it does little to resolve the underlying issue of extreme dependency. China's government has already shown its willingness to use its resource dominance as a geopolitical tool, having banned the export of certain rare earth processing technologies in December 2023 to protect its market position.
While the one-year delay removes a significant headwind for 2026, it reinforces the urgency for the U.S. and its allies to accelerate efforts to build a resilient, independent rare earths supply chain. For now, a trade crisis has been averted, but the long-term strategic competition over the minerals that power the modern economy is far from over.