China Suspends Exports on Rare Earth Metals and Magnets

What Happened?

In retaliation for the Trump Administration’s tariffs on Chinese goods, China’s government has responded by suspending the export of rare earth metals and magnets.

The shipment of these minerals and magnets have been halted at Chinese ports until the government in Beijing devises and implements a new regulatory system. 

The Chinese government has placed restrictions on the export of six heavy rare earth metals refined entirely in China, as well as rare earth magnets, 90 percent of which are produced in China. The metals, and special magnets made with them, must now have a special license in order to be shipped out of China. Beijing has not indicated exactly when the new licensing system will be unveiled.

Why it Matters

The halting of the rare earth metals and magnets from China have the potential to impact a number of different industries in the United States. The rare earth metals covered by the new restrictions are used in magnets essential for many kinds of electric motors and crucial components of electric cars, drones, robots, missiles and spacecraft.

The metals are also used in chemicals for manufacturing jet engines, lasers, car headlights and certain spark plugs. Some of the rare earth metals are also vital ingredients in capacitors, which are electrical components of the computer chips that power artificial intelligence servers and smartphones. How long the cessation of exports will last is uncertain, but it does appear the stoppage is not planned to be indefinite.

Michael Silver, the chairman and chief executive of American Elements, a chemicals supplier based in Los Angeles. According to Keith Bradsher of the New York Times, Michael Silver said his company had been told it would take 45 days before export licenses could be issued and exports of rare earth metals and magnets would resume. 

The affected rare earth metals represent a small portion of China’s exports. Meaning the impact of the new restrictions will also be small in China, but their absence could have a much bigger impact elsewhere.

Daniel Pickard, the chairman of the critical minerals advisory committee for the Office of the United States Trade Representative and Department of Commerce. He said he believes there are potential severe effects to the U.S. economy from the new export restrictions in China. China has also placed reciprocal tariffs on a range of goods, and American consumers are already seeing price increases from the new trade war in grocery and department stores. 

How it Affects You

China’s Ministry of Commerce is continuing to ban Chinese companies from doing business with a growing list of American businesses, including defense contractors. In particular, drones and autonomous vehicles rely on many of the elements included in the new restrictions, meaning their supply chain for future production has been threatened.