US military and automakers raise alarms as China leverages rare earth trump card

Alarm over China’s increasing control over critical minerals intensified on June 3 as both global automakers and US defence officials raised the stakes in the ongoing trade dispute with Beijing.

The latest concerns were sparked by China’s sweeping restrictions on exports of rare earth alloys, mixtures, and magnets, which have triggered warnings of serious production delays and even shutdowns in key industries worldwide.

German car manufacturers have now joined their US counterparts in sounding the alarm, noting that the curbs could cripple vehicle production, disrupt supply chains, and potentially rattle local economies.

China’s decision in April to suspend exports of a broad range of critical minerals—including magnets, essential for building everything from electric vehicles to missiles—has upended the global supply chains that automakers, aerospace companies, and military contractors depend on. These export controls underscore China’s overwhelming dominance in the critical minerals market and are widely perceived as part of its strategy to leverage its position in the ongoing trade war with the United States.

Warning about the bleak situation, Germany's automotive lobby head, Hildegard Mueller, told Reuters, “If the situation is not changed quickly, production delays and even production outages can no longer be ruled out.”

The worries over these mineral export restrictions are not limited to the automotive sector. Semiconductor companies, defence contractors, and other industries reliant on rare earth magnets for their products have also voiced concern.

With the export ban still in place, officials from various countries, including Japan, India, and the European Union (EU), have been urgently pushing for Beijing to lift the export restrictions.

A business delegation from Japan will visit Beijing in early June to meet with the Ministry of Commerce over the curbs, and European diplomats from countries with big auto industries have also sought "emergency" meetings with Chinese officials in recent weeks, Reuters reported.

Strategic leverage in trade war with the US

China's rare earth dominance is a key bargaining chip in its ongoing trade standoff with the US, particularly under President Donald Trump’s administration. Trump’s aggressive tariffs and trade measures against China, including tariffs as high as 145 per cent placed earlier, have created an environment where Beijing can flex its muscle in ways that have reverberated across global supply chains.

Reuters reported that according to Frank Fannon, a former US Assistant Secretary of State for Energy Resources,the disruptions should not come as a surprise to anyone who has been paying attention to the shifting global dynamics in mineral supply chains.

“We have a production challenge (in the US), and we need to leverage our whole government approach to secure resources and ramp up domestic capability as soon as possible. The time horizon to do this was yesterday,” Fannon said.

In response to China’s move, US diplomats, automakers, and military executives have escalated their discussions with Beijing, scrambling to identify alternate sources for these critical materials. The most immediate concern revolves around rare earth magnets. The export controls have created a shortage of key materials, risking disruption to production as early as the end of this summer.

China’s export halt has also raised the stakes for US defence contractors. The Pentagon's advanced weapon systems—such as F-35 fighter jets, naval ships, and missiles—are heavily dependent on rare earths and other critical minerals.

US strategic vulnerability and the race for alternatives

China mines 70 per cent of the world’s rare earth materials. Myanmar, Australia and the United States mine most of the rest. But China does the chemical processing for 90 per cent of the world’s rare earths because it refines all of its own ore and also practically all of Myanmar’s and nearly half of US production, and the Pentagon is particularly vulnerable to any disruptions in this supply chain.

The Pentagon has long relied on China for its supply of critical minerals used in advanced weaponry, but the recent restrictions on exports of seven medium and heavy rare earth elements have exposed the vulnerabilities in US military readiness.

China’s recent export controls on gallium, germanium, and other materials have also had a significant impact. These minerals are indispensable in manufacturing technologies used by the military, and their scarcity could hinder America’s ability to maintain its technological edge.

Despite this, the US military is beginning to act to mitigate its dependence on China. The Pentagon has been investing heavily in building domestic supply chains for critical minerals. Since 2020, the US government has allocated more than $400 million to develop alternative sources, and the US company MP Materials has been awarded significant funding to help increase production at the Mountain Pass mine in California.

However, experts caution that this is a slow process. The US still relies heavily on China for its refined critical minerals, with only one mine in the US producing rare earth elements, and even then, it only accounts for about 11 per cent of global production, according to Statista.

As geopolitical tensions rise between the US and China, the rare earth mineral issue is poised to become an even more significant flashpoint. China has a long history of using rare earth exports as leverage in diplomatic disputes, including a brief but intense embargo on shipments to Japan in 2010 during a territorial disagreement.

While US efforts to develop alternative sources of critical minerals continue, the global automotive and defence sectors remain on edge, fearing that Beijing’s strategic control over these materials will continue to disrupt industries vital to both economic growth and national security. The ongoing situation underscores the urgent need for the US to diversify its mineral supply chains and reduce reliance on China in the years ahead.

(With inputs from agencies)