China’s Rare Earth Export Controls Escalate Trade Tensions

The China-US trade conflict intensified in 2025 as China expanded restrictions on rare earth mineral exports. This move triggered threats of retaliatory tariffs from the US. China’s dominance in rare earth production and processing remains a key strategic leverage point in global trade and technology sectors.

What Are Rare Earth Elements?

Rare earth elements (REEs) are a group of 17 metallic elements including lanthanum to lutetium, plus scandium and yttrium. They have unique properties like high density and conductivity. Despite their name, they are relatively abundant in the Earth’s crust but rarely found in concentrated deposits. This makes mining costly and complex.

Importance of Rare Earths

REEs are essential in modern technology. They are used in electronics, defence, electric vehicles, wind turbines, medical devices and more. Neodymium-based magnets are crucial for motors and consumer electronics. Cerium and lanthanum aid in glass polishing and pollution control. Their unique properties enable green energy and advanced electronics.

China’s Dominance in Rare Earths

China controls over 60% of global rare earth mining and more than 90% of processing capacity. Since the late 1980s, China has developed this sector as part of its industrial strategy. It uses export restrictions as a trade weapon to gain leverage in international negotiations, particularly with the US.

Recent Export Restrictions

Recently, China added five more rare earth elements and related materials to its export control list. This followed earlier restrictions on seven other elements. China also tightened controls on refining technologies and imposed compliance rules on foreign producers using Chinese materials. These measures came just before a trade truce with the US expired.

Global Supply Chain Challenges

Other countries like Brazil, Australia, and India have rare earth reserves but face economic and environmental hurdles in mining and processing. China’s long-term investments and lower environmental standards have allowed it to dominate. Efforts to diversify supply chains are underway but remain limited.

Impact on India and Other Nations

India’s rare earth consumption is modest but growing. It imports most rare earths from China and Hong Kong. The auto and electronics sectors are vulnerable to supply disruptions. India is exploring seabed mining and developing rare earth processing parks to reduce dependence. The US is also planning to stockpile seabed metals and revive domestic processing. Japan has successfully re-entered the supply chain after past Chinese restrictions.

Strategic and Economic Implications

Rare earths have become a geopolitical tool. Control over these minerals affects technology, defence, and green energy sectors worldwide. The China-US trade war marks the risks of over-reliance on a single supplier. Diversification and sustainable mining are critical for future security and economic stability.

Questions for UPSC:

1. Critically discuss the strategic significance of rare earth elements in global trade and geopolitics. With examples, examine how mineral resources can be used as tools of economic diplomacy.
2. Analyse the environmental and economic challenges of rare earth mining. Discuss in the light of sustainable development goals and technological advancements.
3. What are the implications of supply chain dependencies in critical minerals for national security? How can countries like India and the US reduce vulnerabilities?
4. Taking example of the China-US trade war, discuss the role of industrial policy in shaping global competitiveness in high-technology sectors. Examine the impact on international relations.

Answer Hints:

1. Critically discuss the strategic significance of rare earth elements in global trade and geopolitics. With examples, examine how mineral resources can be used as tools of economic diplomacy.

1. Rare earth elements (REEs) are essential for advanced technologies – electronics, defense, green energy, and medical devices.
2. China controls over 60% of global mining and 90%+ of processing, giving it strategic leverage in global trade.
3. China’s export restrictions on REEs have been used as trade weapons, e.g., during the China-US trade war to exert pressure.
4. Historical example – China’s 2010 rare earth export curbs on Japan during a diplomatic dispute showed mineral resources as economic leverage.
5. Mineral resources like REEs influence geopolitical power by controlling supply chains critical to military and technology sectors.
6. Other countries (US, Japan) seek diversification and stockpiling to reduce dependence and mitigate geopolitical risks.

2. Analyse the environmental and economic challenges of rare earth mining. Discuss in the light of sustainable development goals and technological advancements.

1. Rare earth mining involves extraction from low-concentration ores, making it costly and complex.
2. Mining and processing generate toxic waste and pollution, posing serious environmental hazards.
3. Many countries avoid large-scale mining due to ecological damage and regulatory constraints.
4. Sustainable Development Goals emphasize responsible consumption, pollution reduction, and ecosystem protection, challenging current REE mining practices.
5. Technological advancements aim to improve extraction efficiency and reduce environmental footprints (e.g., cleaner processing methods, recycling REEs).
6. China’s dominance partly due to lower environmental standards and long-term investments, raising global sustainability concerns.

3. What are the implications of supply chain dependencies in critical minerals for national security? How can countries like India and the US reduce vulnerabilities?

1. Dependence on single or limited suppliers (e.g., China for REEs) risks supply disruptions impacting defense and technology sectors.
2. Supply chain vulnerabilities can weaken military readiness, economic stability, and technological innovation.
3. India and the US import a large share of rare earths from China and face risks from export restrictions or geopolitical tensions.
4. Strategies to reduce vulnerabilities include developing domestic mining/refining capacity and investing in alternative sources like seabed mining.
5. Stockpiling critical minerals and forming international alliances to diversify supply chains enhance resilience.
6. Investing in recycling and substitution technologies can reduce demand pressure on critical minerals.

4. Taking example of the China-US trade war, discuss the role of industrial policy in shaping global competitiveness in high-technology sectors. Examine the impact on international relations.

1. China’s industrial policy prioritized rare earth sector development since the 1980s, enabling dominance in mining and processing.
2. State-led investments and lower environmental regulations gave China cost and scale advantages over competitors.
3. Control over rare earths strengthens China’s bargaining power in trade disputes, as seen in the US-China trade war.
4. US tariffs and threats of retaliation reflect attempts to counter China’s industrial strategy and reduce dependency.
5. Such industrial policies influence global supply chains, technology leadership, and create geopolitical tensions.
6. Trade conflicts over strategic minerals exacerbate mistrust, complicate diplomacy, and encourage countries to seek self-reliance or alliances.