China’s Rare-Earths Export Slowdown Chokes Global Tech Supply Chains

Beijing’s bureaucratic bottlenecks are quietly strangling the flow of critical minerals—and manufacturers worldwide are feeling the squeeze.

Why it matters: From smartphones to fighter jets, rare earths power the tech that runs our world. When China sneezes, global supply chains catch pneumonia (and Wall Street still finds a way to short the crisis).

The domino effect: Factory floors from Detroit to Dresden are recalculating production timelines as customs delays stretch into weeks. Meanwhile, commodity traders are placing bets like it’s a high-stakes poker game—because for them, it is.

Bottom line: In the race to secure tech dominance, China just threw sand in the gears. The question isn’t if companies will adapt, but how many will get crushed in the process.

China’s rare-earth controls may be a strategic response to US tariffs

So far, it is not clear whether any shipments bound for the United States have received licences since Washington and Beijing declared a 90-day ceasefire in their tariff war earlier this month. 

Yantai Zhenghai Magnetic Material, based in Shandong Province, confirmed it had secured export permits and had “resumed” taking orders from certain buyers.

Two people familiar with the situation said at least one consignment destined for Volkswagen’s operations in Germany had also been cleared. Volkswagen stated that its supply of parts containing rare earths remained stable and that its suppliers had received “a limited number of these [export] licences.”

Inside the industry, companies fear the ministry will be overwhelmed as licence applications pour in. One executive said European importers “are not sure how to prove” that their shipments will not be re-exported to the United States, a step that would break the permit rules.

Slow license approvals would affect Western companies

Tesla chief Elon Musk told investors last month that Chinese officials had asked for assurances that the rare-earth magnets used in the company’s robot arms would not go into military hardware. “That is an example of a challenge there. I’m confident we’ll overcome these issues,” he said.

Permanent magnets made from rare earths are found in combat aircraft such as Lockheed’s F-35. Short-term shortages could disrupt production lines, and experts predict that the new controls will speed up long-term efforts in the West to build alternative supply chains.

Evan Scott, chief financial officer at Lockheed, told investors this week that the company had enough rare-earth material for the rest of the year. He added that he expected US authorities to give priority to Lockheed’s needs “given the importance of our programmes.”

Cameron Johnson, partner at the Shanghai-based consulting firm Tidalwave Solutions, said he believes some big companies with long histories in China have managed to move rare-earth cargoes even before their licences were formally approved. “There is still material going out,” he said.

Cory Combs, associate director at Trivium China, a Beijing consultancy, noted that there is “certainly no evidence” that China has “bluntly cut everyone off.” With the 90-day tariff truce now in place, he expects the commerce ministry to grant more permits, but he warned that uncertainty remains high. 

“Everyone wants Mofcom to provide clarity,” Mr Combs said. “But China’s strategic leverage relies partly on the ability to pull the export control lever to the extent that the US does not provide a satisfying deal.”

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