According to the United States Geological Survey (USGS), as of 2023, China accounted for 70% of global rare earth production. This dominant position gives Beijing substantial leverage in trade and diplomatic disputes.

The export ban, effective from July 2024, followed the United States’ expansion of export controls that restricted Chinese companies from acquiring advanced semiconductor manufacturing tools. In response, Beijing required exporters to obtain state approval before shipping gallium and germanium—metals vital in chipmaking and military-grade communication equipment. China's ministry of commerce stated, “The aim is to protect national security and interests,” though industry analysts argue it is a tit-for-tat move designed to remind the West of China's chokehold over strategic resources.

Further escalating its strategic posture, in December 2023, China also imposed a ban on the export of rare earth extraction and separation technologies. This decision significantly impacted the global efforts to develop REE supply chain capabilities outside of China. There are two main reasons for this. First, China possesses specialised technical expertise that remains unmatched globally. In particular, it holds an absolute advantage in solvent extraction processing techniques for rare earths, an area where western companies have consistently struggled—not only in mastering the complex technology but also in addressing the associated environmental challenges. Second, although multiple facilities for separation, processing, and manufacturing are currently under construction across the US, Europe, and parts of Asia, completing these projects and achieving full operational capacity will require several more years.

Following President Donald Trump’s return to office in January 2025, US-China tensions escalated dramatically. In February 2025, Trump signed Executive Order 14195, introducing a new 10% baseline tariff on all Chinese imports, citing concerns over the export of fentanyl-related substances. In retaliation, China implemented a slew of measures:

● Tariff increases: China imposed a 15% tariff on US coal and liquefied natural gas, and a 10% tariff on crude oil, agricultural machinery, and vehicles with large engines.

● Export controls expansion: China further tightened export controls on critical minerals, including gallium, germanium, antimony, and six heavy rare earth elements. Exporters now need special licences, slowing or halting shipments.

● Unreliable entity list: Several US firms were added to this list, facing restrictions and potential sanctions. Investigations into antitrust practices of major American tech firms also resumed.

● Suspension of talks: China suspended negotiations over the divestment or ban of TikTok, signalling a cooling of diplomacy.

These actions demonstrated Beijing’s readiness to use its dominant position in critical supply chains as a geopolitical counterweight. The ban had an immediate effect on commodity prices. Gallium prices rose by over 18% within the first two weeks of the announcement, while germanium saw a 12% price jump, as per the London Metal Exchange (LME, 2024). Companies reliant on these metals, particularly in South Korea, Japan, and the European Union, began stockpiling and exploring alternate suppliers.

According to S&P Global, Germany imports 45% of its gallium and 50% of its germanium from China. Similarly, the US sources more than 60% of its rare earth imports from Chinese suppliers (S&P Global, 2024). These figures underscore the West’s heavy reliance on China’s resource chain.

The EU, already pursuing the Critical Raw Materials Act, has accelerated funding to domestic exploration and recycling. Under the new framework, the EU aims to source at least 10% of its strategic raw materials domestically and recycle 15% by 2030 (European Commission, 2024). In the US, the department of defence allocated funds in 2024 towards the development of a rare earth separation facility in Texas, in partnership with Australian mining firm Lynas Rare Earths. The facility is expected to become operational by late 2025 but will cover only a fraction of US demand.

Japan, which has previously faced similar restrictions from China in 2010, is investing in rare earth mining in Vietnam and Mongolia. Tokyo also announced a $2 billion strategic metals stockpile programme to cushion against future disruptions.

In the short-term, manufacturers—particularly in sectors such as automotive and renewable energy—will face production delays and increased costs. Longer-term consequences include diversification of supply, reshoring and friend-shoring of manufacturing, and acceleration of recycling. Countries are seeking alternatives in Africa (notably the Democratic Republic of Congo and Malawi), South America, and Australia. However, these efforts face logistical, environmental, and political hurdles. There is also a renewed focus on rare earth recycling. Firms such as Urban Mining Co. in Texas and Ucore Rare Metals in Canada are pioneering technologies to recover REEs from electronic waste.

China’s rare earth production has historically been associated with severe environmental degradation, including radioactive waste discharge and contaminated groundwater. If mining expands to other parts of the world, a global reckoning with the environmental impact is likely.

Moreover, there is growing concern over human rights violations linked to artisanal mining in parts of the Global South. Ethical sourcing standards and transparent supply chains will become crucial in establishing new production hubs.

The rare earth ban is part of a broader shift towards economic statecraft. It reveals that global trade is increasingly influenced by strategic calculations rather than pure market efficiency. China is asserting its ability to influence global tech development through its command of critical resources. This development may deepen the technological decoupling between China and the West. The world’s two largest economies are building parallel ecosystems—one focused on democratic alliances, the other on alternative blocs such as BRICS.

China’s ban on rare earth metal exports, under the shadow of the tariff war and heightened by the Trump administration’s trade policies in 2025, represents more than a simple trade dispute—it is a strategic statement about control, sovereignty, and technological dominance. The implications for the global economy are vast, ranging from supply chain overhauls and price volatility to geopolitical realignment. This pivotal moment serves as a wake-up call for governments and corporations. In an era where the minerals beneath the earth are as valuable as the code that runs our machines, those who control extraction and processing will shape the trajectory of industrial power and technological innovation.

This article is authored by Ananya Raj Kakoti, scholar, international relations, Jawaharlal Nehru University, New Delhi.