China's Rare Earth Export Restrictions and Other Countries' Responses:

In April 2025, China implemented export restrictions on seven rare earths as a response to tariffs imposed by the U.S. Trump administration, and the impact of these restrictions is spreading around the world. Due to the stagnation in the supply of parts using rare earths, not only have U.S. manufacturers been forced to suspend production of automobiles, but automakers in Europe and Japan have also suspended production.[1]

As discussed in detail below, rare earths, for which China has implemented export controls, are used in data equipment, motors and turbines for electric power vehicles (EVs) and wind power generation and are essential for both digital transformation (DX) and green transformation (GX), which have become international trends in the 21st century. It also includes rare earths essential to the aerospace industry and laser manufacturing, and the impact could extend to military equipment. Rare earths cannot be utilized as-is as a resource but can only be used through complex refining techniques. China dominates the international market for both mining and refining. Considering these circumstances, it can be said that this measure is the main battleground of economic security for the countries, and they are forced to take countermeasures.

The concept of economic security is known to have emerged in the early 20th century, but it has only rapidly spread to the international community since the 2010s, to summarize the proposed definition,

(i) To protect the people from threats such as supply disruptions of critical commodities and advanced technologies and excessive dependence on other countries, and to maintain their survival and the sovereignty of the nation.
(ii) Use of critical commodities or advanced technology to expand its own interests or achieve diplomatic objectives.

Thus, there are two aspects of “defense” and “offense”. It is also a concept that encompasses energy security and food security by adding the presence of technologies as well as the production and supply of resources and food.[2] According to the above definition, the current situation in the world is that China, using its abundant rare earth reserves and refining technology as a shield, is on the “offensive” to expand its own influence, while other countries are forced to play “defense”.

This paper will first identify the characteristics of the seven rare earth elements for which China has implemented export controls, then analyze China's measures and the responses of other countries from the perspective of economic security. Finally consider the measures that should be taken by each country, including Japan.

Rare earths refer to 17 elements that have electrical and chemical properties such as permanent magnets, of which seven are light rare earth elements and 10 are heavy rare earth elements. All of these are indispensable for high-tech industries, but heavy rare earths are indispensable and more important in fields directly related to national security, such as laser equipment and the aerospace industry.[3] The seven elements for which China has tightened export controls are all heavy rare earths, and their main uses are shown in Table 1.

Table 1: Rare Earths for which China has tightened export controls

　Source: Prepared by the author based on Katsuhiro Saito, "Rare Metals; Rare Earths The Amazing Abilities," (in Japanese) C&R Research Institute, May 2019, etc.

On 4 April 2025, China's Ministry of Commerce announced the strengthening of export controls on rare earths in Table 1 in accordance with the country's Export Control Law and Regulations on Export Control of Dual-Use Items to ensure national security and fulfill international obligations to prevent the proliferation of nuclear weapons and other military equipment. When a business exports these items, it is required to apply for a permit from the Ministry of Commerce in accordance with the above laws and ordinances. If there is any doubt about the application, customs clearance will not be allowed.[4] In effect, it appears to be retaliation for the U.S. tariffs.

Although China's measures are not export volume restrictions, customs clearance delays have affected supply volumes and transaction prices. According to Argus Media, a British research firm that analyzes global trends in rare earths, the trading price of dysprosium in Europe as of May 1 tripled to $850 per kilogram, three times higher than in early April, and terbium tripled to $3,000 before the regulation. This is the largest monthly increase since May 2015, when data can be traced back. As a result, economic activities in other countries have been affected, as we have seen earlier.

These export restrictions are based on China's overwhelming dominance in the international market for rare earth mining and refining.

According to the U.S. Geological Survey (USGS), a U.S. government agency, 48.9% of the world's rare earth reserves are unevenly distributed in China, which also accounts for 68% of the total mined by country (see Figure 1). Since the 2010s, when the importance of economic security has become strongly recognized, diversification of mining countries has been observed in the world, such as the resumption of the closed Mountain Pass mine in the United States, but the disproportionate reserves of heavy rare earths, which are indispensable for security-related equipment, are in China, which is the source of market dominance. More than 90% of the reserves of rare earths at the Mountain Pass Mine and mines in Australia are light rare earths, while the Xinfeng Mine in China's Inner Mongolia Autonomous Region accounts for 40% of the heavy rare earths.[5] It is not easy to secure alternative suppliers.

When it comes to the refining sector, China's market dominance is even more pronounced, accounting for over 90% (see Figure 2). The world must rely on Chinese refining to utilize rare earths for the applications shown in Table 1.

Figure 1：Mining Ratio of Rare Earths by Country (2023)

　Source: Prepared by the author based on USGS “Mineral Commodity Summaries 2024”

Figure 2：Rare Earth Refining Ratio by Country

Source: Prepared by the author based on “Global Critical Minerals Outlook 2024” by the International Energy Agency (IEA).

One of the reasons why the supply of rare earths has been concentrated in China is that a large amount of pollutants such as toxic gases, sludge, and radioactive materials are generated in the process from mining and refining, and the physical burden on workers and the surrounding environment is tremendous. The reason is that to separate rare earths mixed in a single ore requires the use of a large number of chemicals.[6] In France, which until the 1980s led the international market for rare earths along with the United States, wastewater from a plant in the western part of the country engaged in the refining of rare earths and minerals was reported to contain radioactive materials at concentrations nearly 100 times higher than the average for other regions.[7] As a result, environmental protection momentum in Western countries increased, and most operators withdrew from mining and refining of rare earths or drastically reduced the scale of their operations, while the initiative shifted to China, where environmental regulations are looser than in other countries. Since the 1950s, China has focused on rare earths as an indispensable resource for the next generation, and in 1992, Deng Xiaoping, the country's supreme leader at the time, said, “There is oil in the Middle East and rare earths in China”.[8] As discussed below, China has also postponed the resolution of labor condition improvements and environmental pollution that could not be resolved in Western countries, but it has thus established a monopoly on rare earth supply and is in a position to exert influence over the world's advanced technology and military industries.

This tightening of export controls has accelerated the rebuilding of rare-earth supply chains in Western democracies, where the risk of dependence on China has become apparent.

In particular, the United States is experiencing a growing sense of crisis. In March 2025, prior to China's export controls, President Trump signed an executive order called “Immediate Measures to Increase American Mineral Production” and announced an increase in rare earth production.[9] The following April, the U.S signed a “Mineral resources agreement” with Ukraine, which is facing a military invasion by Russia, in return for military assistance.[10] According to Ukrainian government data, the distribution and types of rare minerals in the country are shown in Figure 3 and Table 2.

Figure 3：Major Mineral Reserves in Ukraine

Source: Prepared by the author based on Gullaume Pitron “La Guerre des metaux rares” (Japanese version), Hara shobo, March 2020, etc.

At present, it has been confirmed that Ukraine has reserves of critical minerals used in the EVs, aerospace and nuclear industries, but it is unclear how much of the heavy rare earths that China has imposed export restrictions on are reserved.[11] Moreover, the issue of refining is not solved by this agreement. As Figures 1 and 2 clearly show, although the U.S. mines rare earths, it exports almost all of them to China for refining. The situation of high tariffs with China is not only strangling itself, but if the United States does not promote in-house production of refining, it will continue to be dependent on China forever.

To this end, the government is seeking to expand its mining and refining operations to the few remaining rare earth operators in the U.S., as well as to attract refiners from allied and like-minded countries to the U.S.

MP Materials, which is engaged in rare earth mining at its Mountain Pass mine in California, has announced that it will expand its mining and refining operations because the mine also contains rare earths that China has restricted for export.[12] In addition, Australia's Lynas, which is engaged in refining at its plant in Malaysia and occupies a certain position in the international market for rare earth refining, although it is far from China (see Figure 2), is building a new rare earth refining plant in Texas. From the perspective of national security, the U.S. Department of Defense is subsidizing the construction of the plant by 258 million dollars (about 36.8 billion yen) as part of restructuring the rare earth supply chain. The plant is scheduled to start operations in 2026.[13]

Japan was the first country in the world to experience Chinese restrictions on rare earth exports. In September 2010, the Japan Coast Guard demanded that a Chinese fishing boat operating in Japanese territorial waters off the Senkaku Islands leave the area, but it did not comply. The captain of the fishing boat was arrested on suspicion of obstruction of justice after the fishing boat struck a Coast Guard patrol boat. China reacted and imposed restrictions on exports of rare earths to Japan. According to trade statistics from the Ministry of Finance, imports of rare earths from China plummeted from 2,246 tons in September 2010 to 1,278 tons in October.[14]

Based on this background, Japan has been promoting measures from two aspects. The first is the establishment of a rare earth supply chain outside of China. Sojitz, a general trading company, and the Japan Energy, Metals & Minerals Corporation (JOGMEC) invested in the aforementioned Lynas in 2011, and in March 2023, they will provide an additional loan of approximately 18 billion yen to supply up to 65% of the heavy rare earths (dysprosium and terbium; see Table 1) mined by Lynas and refined at its plant in Malaysia to Japan.[15] This is Japan's first acquisition of rare earth interests. In May 2024, the Ministry of Economy, Trade and Industry (METI) decided to contribute 100 million euros (about 16.5 billion yen) to rare earth refining by Caremag of France through JOGMEC. In March 2025, energy companies Iwatani & Co., Ltd. and JOGMEC decided to invest up to 110 million euros in the company and participate in rare earth refining. The supply of dysprosium and terbium (see Table 1), which are heavy rare earths, is expected to be equivalent to 20% of the demand in Japan in the future.[16]

The second is efforts to reduce dependence on rare earths themselves. The New Energy and Industrial Technology Development Organization (NEDO) has started developing motors that do not use rare earths from 2024,[17] and parts manufacturers and start-ups are competing to develop rare earth-free motors with the aim of mass production between 2027 and 2028. First, it is expected to be put to practical use in small EVs.

To what extent will “Western democracies” efforts to reduce their dependence on China be successful? The IEA estimates the refining ratio by country for the rare earth situation in 2040 as follows (see Figure 4).

Figure 4：Rare-earth Refining Ratio by Country as of 2040