China Maintains Grip on Rare Earth Exports Despite US Trade Truce

Despite a 90-day trade truce with the US, China appears to be maintaining tight control over its rare earth exports, preserving a key source of leverage in future negotiations. US Trade Representative Jamieson Greer suggested China agreed to lift export restrictions on rare earths, stating, “Yep, the Chinese have agreed to remove those countermeasures.” However, experts and industry insiders indicate China is strengthening implementation and ramping up oversight.

China’s export licensing regime requires government approval for each shipment, causing weeks-long holdups. Experts believe this system is “here to stay” and “may stay for a long time,” allowing Beijing to retain leverage in future trade talks. Gracelin Baskaran, director of the Critical Minerals Security Program at CSIS, notes that China can withhold licenses if the US reneges on tariff policy.

Key Expert Insights:

• Jon Hykawy, Stormcrow Capital: “I would not be shocked to find that Mr. Greer is expressing what he hopes will happen versus what has actually been negotiated to happen.”
• Gracelin Baskaran, CSIS: China’s export licensing regime is “dynamic by design, giving Beijing the power to decide which companies or countries can access its rare earth minerals and magnets at any given time.”
• Thomas Kruemmer, Ginger International Trade and Investment: China’s rare earth export controls were “specifically designed to hit the US defense industry, and I cannot envision China stepping back from that.”
• James Kennedy, Three Consulting: China’s control over rare earths is a “geopolitical weapon of never-before measured and seen effect… creating a lot of uncertainty, and that in itself is a powerful weapon.”

China’s actions suggest it is using rare earth exports as a geopolitical tool, granting licenses to companies like Volkswagen while keeping US defense firms uncertain. This move may indicate China’s strategy to maintain leverage in the industry.