Despite Export Deal, Further Delays in China’s Rare-Earth Shipments Could Trigger Renewed Trade Clash
Udumbara
Washington and Beijing, on June 26, appeared to have finalized a deal meant to unblock rare-earth exports from China, more than six weeks after China first made the offer.
During mid-May talks in Geneva, Beijing linked the resumption of rare earth exports to Washington, cutting the incremental tariff rate on Chinese goods entering the United States from 145 percent to 30 percent. Yet six weeks passed—and after follow-up talks in London on June 9–10—with no deliveries.
If China follows through this time, it could remove a growing irritant in the trade negotiations and relieve pressure on U.S. manufacturers already scrambling for rare earth supplies.
Analysts say the delay shows how a monopoly built over five decades now lets Beijing wield rare earths as a powerful bargaining chip in wider trade talks—a weapon that could further escalate the already simmering tensions with Washington.
Speaking to The Epoch Times on June 23 before another round of closed-door meetings in Washington, he warned the situation could “get very serious, very quickly.”
“We’re talking about shutting down automobile production lines and defense-contractor production lines,” Smith said.
Asked on June 26 about the shortage, the company told The Epoch Times it is “encouraged by progress with talks between the [Trump] Administration and China and will continue to work with the President and his team on what’s best for the auto industry.”
Inside Washington, Smith said, the rare-earth crunch now ranks as the “number one” priority, drawing in the Departments of State, Commerce, Interior, and Defense—some of which contact him almost daily.
The Epoch Times has asked those departments for comment.
Department of Interior replied on July 27 that “resolving heavy rare-earth supply constraints is a current priority” and said it is working with multiple departments in a ”whole-of-government approach” to shore up critical mineral supply chains.
According to Smith, the administration has brought in industry experts like him to explore possible remedies and strategies on the issue, while Smith’s NioCorp is pursuing federal financing for its fully permitted Nebraska mine—which, if built, could help supply some heavy rare earths.
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The bottleneck began on April 4, when the Chinese Communist Party (CCP) issued new export-control rules requiring special permits for magnets and seven heavy rare-earth elements that it monopolizes—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.
The controls cover every form of those elements—oxides, metals, alloys, mixtures, and finished magnets—vital to electric-vehicle motors, wind-turbine generators, industrial robots, precision-guided missiles, and more.
China currently supplies essentially “100 percent” of these seven heavy rare earths in the world, Smith noted.
In response to reports that Beijing has issued some licenses to some U.S. companies, Smith said many are under military review, meaning anything deemed “dual-use”—can be used for both commercial and military purposes—won’t get approved.
He also cautioned that even license approvals offer no guarantee of delivery: “They have not exported any of the minerals yet [and are] really going slow on this process.”
China already produces well over 90 percent of the world’s rare-earth permanent magnets, and every high-temperature version needs “just a little bit of dysprosium or terbium” that only Beijing supplies, Smith said.
To seal the squeeze, Chinese officials have told at least two U.S. partners—South Korea and Switzerland—not to reroute any oxides, metals, or magnets to American firms, Smith said, according to his industry contacts.
On May 12, the Chinese Ministry of Commerce announced a multi-agency crackdown on strategic mineral smuggling, following a May 9 stepped-up enforcement meeting in Shenzhen.
Historically, Smith said, rampant smuggling muted price spikes whenever China tightened supply. But this time, “they have military people and regulators at the docks actually inspecting the cargo, not just the paperwork.”
Sources inside China, he added, describe the toughest enforcement in decades because Beijing wants the rare-earth card firmly in hand as negotiations continue.
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‘Weaponized Negotiation’
On paper, China’s new export-license rules cover every nation, yet Smith believes the real target is the United States. By threatening any ally that might act as a middleman, Beijing keeps the pressure squarely on Washington.U.S.-based economist Davy J. Wong calls the move a “classic CCP-style weaponized negotiation.” He warned that Beijing’s maneuver could further escalate the already simmering tensions with Washington.
Other countries have felt the pinch, but China has used the “universal nature” of the rules as justification for not fully honoring trade agreements with the United States, Wong told The Epoch Times.
The pattern began in mid-May in Geneva. Beijing offered to resume rare-earth exports if Washington slashed its average tariff on Chinese goods. Washington agreed.
When shipments failed to appear, the White House moved to bar Chinese graduate students from sensitive fields and told U.S. chip-design software makers to cut off Chinese customers.
The same leverage surfaced in early June talks in London. Once again, Beijing promised rare earth shipments if the United States restored student visas and rolled back new chip restrictions.
Both sides kept piling on demands and bargaining them away, so the final “London framework” ended up as little more than a pledge to carry out unresolved parts of the Geneva deal, Wong said.
“The U.S. gambit has extracted only short-term promises,” he added.
Each permit under China’s new license regime is valid for only six months, Wong explained. Chinese producers must reapply when it expires, giving Beijing a rolling throttle it can tighten or loosen without declaring an outright embargo.
For now, there is no quick fix. “You can’t stockpile [rare earths] because you can’t buy anything right now,” Smith said.
Washington, wary of provoking a cutoff, has so far kept tariffs modest—another reason Wong calls the current state a “strategic freeze.”
He doubts Beijing will honor its pledges for long, seeing rare earths as ongoing leverage in future trade talks with Washington.
In the near term, he said, the CCP will push for tariff relief and looser semiconductor controls; over the longer term, it may simply stall—just as it did during Trump’s first term—waiting to see whether post-midterm politics curtail Trump’s options.
“China’s promises should not be taken at face value—they must be enforced, monitored, and penalized if broken,” Wong said.
To keep negotiations from stalling, he said Washington should bind every deadline to automatic penalties, keep fresh sanction packages ready, and coordinate trade, defense, and diplomacy across agencies.
Building an American Supply Chain
“Rare-earth magnets are the most critical thing the U.S. needs right now,” Smith said. “The volume of that business is so much bigger than anything else [involving these] heavy rare earths.”There are two broad magnet classes. Regular-temperature magnets rely on the lighter elements neodymium and praseodymium, while high-temperature magnets—vital for cars, aircraft, and weapons—require dysprosium or terbium.
MP Materials in California and Lynas in Australia already produce neodymium and praseodymium, which likely spared those elements from Beijing’s controls, Smith said.
Outside China, however, no company can produce commercial quantities of terbium, dysprosium, or samarium, the key ingredients for high-temperature magnets.
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Smith’s NioCorp has a fully permitted mine in Nebraska that could produce those elements—but even with financing secured, it would take three years to build.
Smith said most investors shy away from long-term mining projects and tend to favor quicker tech returns, leaving the federal government as the only likely funding source.
If built, NioCorp could meet the Pentagon’s entire demand for dysprosium and terbium—two heavy rare earths over which China now has a near monopoly on processing.
He estimates a domestic rare-earth industry would create about 4,500 direct jobs, with far more in downstream magnet and auto plants.
Domestic output alone will not close the gap, so U.S. producers are also looking offshore.
Yet overseas deals are no substitute for a strong skills pipeline at home.
Education is another hurdle. “We still have institutional knowledge in the United States,” Smith said, “but we need far more of our youth engaged in the technical degrees needed to sustain this capability.”
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A Monopoly 50 Years in the Making
China’s dominance did not happen by chance.For 50 years, Smith said, Beijing has poured trillions into geology programs, solvent-extraction plants, and magnet factories, while keeping export prices artificially low to bankrupt foreign rivals.
“They have whole education programs—PhD level—[dedicated to] rare earths, and they just continue to innovate and improve because of how seriously they take it,” Smith said. “The rest of us just kind of sat back and let that happen.”
He saw the leverage firsthand 15 years ago, when China briefly cut off rare-earth shipments to Japan. As chief executive of Molycorp—the only U.S. rare-earth miner at the time—Smith tried to build a full mines-to-magnets chain.
But when Chinese exports resumed, prices fell, debt piled up, and without U.S. government backing, Molycorp went bankrupt in 2015.
Substitutes help only at the margins, Smith added.
Japan, for example, has managed to cut the dysprosium content in its magnets from about 10 percent to 1 percent, he said.
Yet the inventor of the modern rare-earth magnet, Dr. Masato Sagawa, once told Smith bluntly: “Nothing will ever be able to replace the rare-earth permanent magnet in terms of performance and efficiency.”
Even high-temperature samarium-cobalt magnets—indispensable in aerospace, medical, and other high-temperature settings—need terbium, dysprosium, and samarium, elements that today come only from China, Smith noted.
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Almost Total Control—Except for the Ore
Rare earth production typically consists of three main stages: mining the ore, chemically processing it, and manufacturing end products, such as magnets and alloys.However, China is not invulnerable.
A decade ago, China mined all the ore it processed; today, roughly half comes from Myanmar, where civil conflict and a recent earthquake have choked that flow.
Meanwhile, decades of intensive mining have scarred China’s own landscape.
“It caused a lot of water issues, ground issues, and general contamination,” Smith said, prompting tighter regulations and shrinking domestic ore supply.
“China, even without the stronger environmental regulations, might not be able to produce enough [domestically] for its own needs,” he said. “And they’re looking for ways to continue to grow their capability to supply these minerals to the world.”
As global demand soars, Beijing is scouring Africa and other regions for new ore deposits.
For the United States and its allies, breaking that grip will take years of investment, streamlined permitting, new financing tools, and a workforce trained for an industry that Beijing has nurtured for half a century, the experts said. Until then, every delay at a Chinese port reverberates through American factory floors.
And for now, whether Beijing will honor its latest rare-earth promise to Washington remains an open question.
