U.S.-China trade tensions heated up again on Monday after Beijing issued export controls against a raft of U.S. firms, including two prominent rare-earth companies that Washington has championed in its bid for critical mineral security.
China’s Commerce Ministry will now prohibit Chinese companies from exporting “dual-use” items to 10 U.S. firms it says are linked to the U.S. military in order to “safeguard national security and interests.” The move was taken in response to the U.S. Defense Department’s recent decision to add about two dozen Chinese businesses—including carmaker BYD, Alibaba Group, and Baidu—to a list of companies that Washington says are aiding the Chinese military.
U.S.-China trade tensions heated up again on Monday after Beijing issued export controls against a raft of U.S. firms, including two prominent rare-earth companies that Washington has championed in its bid for critical mineral security.
China’s Commerce Ministry will now prohibit Chinese companies from exporting “dual-use” items to 10 U.S. firms it says are linked to the U.S. military in order to “safeguard national security and interests.” The move was taken in response to the U.S. Defense Department’s recent decision to add about two dozen Chinese businesses—including carmaker BYD, Alibaba Group, and Baidu—to a list of companies that Washington says are aiding the Chinese military.
This is “China just playing tit for tat with [U.S. President Donald] Trump on the trade war,” said Jack Lifton, a co-chair of the Critical Minerals Institute, which connects stakeholders in the industry.
By singling out two U.S. firms central to the Trump administration’s rare-earth push—MP Materials and USA Rare Earth—Beijing appears to be flexing its muscles and underscoring the extent of its supply chain leverage at a time when much of the world is scrambling to diversify away. China is a rare-earth behemoth, commanding about 90 percent of refining and nearly 95 percent of permanent magnet production, according to the International Energy Agency.
China is firing a “warning shot,” said Bryan Bille, a policy analyst at Benchmark Mineral Intelligence.
Beijing has almost tripled its use of export restrictions over the last five years, and this is not the first time that rare earths have reared their head in U.S.-China trade spats. After the Trump administration announced tariffs against much of the world last year, Beijing struck back with its own rare-earth export restrictions, leading to multiple rounds of negotiations between the two countries. Both parties ultimately agreed to a one-year trade truce that is set to expire in the fall.
The announced export restrictions come as the Trump administration has pumped billions of dollars into the rare-earth sector as part of Washington’s broader bid to cut U.S. reliance on Chinese supply chains. Strict new restrictions by the Pentagon, which will kick in next year, will also limit where manufacturers can source certain magnets and metals from.
At the forefront of the Trump administration’s rare-earth push is MP Materials, which owns the only operational rare-earth mine in the United States and now counts the Defense Department as its biggest shareholder following a multibillion-dollar deal last year.
The Trump administration has also taken an equity stake in USA Rare Earth, a lossmaking company that has been on a dealmaking spree in its bid to become a more dominant player in the sector. Those deals include the firm’s acquisition of the U.K.-based Less Common Metals, a rare-earth metal and alloy manufacturer, and its announced purchase of Serra Verde, a Brazilian firm that owns a rare-earth mine and processing plant.
It wasn’t immediately clear what the impact of the new restrictions would be on the U.S. companies, though, beyond the symbolic effect.
The restrictions could pose a problem if either MP Materials or USA Rare Earth sourced equipment from China, for example, but both companies have likely “gone to great lengths to avoid integrating with China in any way,” Chris Berry, the president of House Mountain Partners, an independent metals analysis consultancy, said in an email to Foreign Policy.
Another issue could arise if either company used Chinese technology to separate rare earths or produce magnets, “but it’s tough to really know what is Chinese tech and what is home grown,” Berry added.
China hadn’t been exporting to MP Materials and USA Rare Earth anyway, given their role as “direct competitors to the Chinese rare-earth industry,” according to Lifton of the Critical Minerals Institute.
“China’s just putting us on notice that they’re paying attention to all this,” he said. “They will not allow exporters to export to any American company they consider to be part of the military-industrial production complex.”
Both MP Materials and USA Rare Earth declined to comment.
