The Strategic Game of Rare Earths: Why China May Only Be in Favor of Temporary Export Restrictions

Hélène Nguemgaing, Sangita Kannan, Beia Spiller and Michael Toman ()
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Beia Spiller: Resources for the Future

No 25-12, RFF Issue Briefs from Resources for the Future

Abstract: In April 2025, China imposed export controls on seven rare earth elements (REEs) and related embedded products to all countries (Jackson et al. 2025), intensifying an already critical debate over the security and resilience of global supply chains. The Chinese announced that exporters must apply for licenses to sell these materials overseas, a move widely seen as a strategic maneuver. The restriction, though not an outright ban, introduces review mechanisms that complicate export logistics and international procurement. The elements subject to the restrictions include scandium, yttrium, samarium, gadolinium, terbium, dysprosium, and lutetium. These materials are classified as medium and heavy rare earths, known for their magnetic, optical, and catalytic properties. Each plays a specific and often irreplaceable role in a range of high-tech and strategic sectors. These restrictions came at a time when trade tensions were escalating between the United States and China and sent ripple effects through industries that rely on rare earths for advanced manufacturing, defense, clean energy, and digital infrastructure. In June 2025, a framework for a trade deal was agreed upon between the United States and China, which was expected to ease export restrictions of rare earth products (Miao and Feng 2025). Despite the trade deal, it is important to note that the licensing system to obtain approvals from China still holds good for rare earth and related product exports. Though it is too early to state the effects of the trade deal on exports of rare earth products for all sectors, it is being reported that exports to the United States surged in June 2025 compared to May (Reuters 2025), though approvals for western companies are taking longer and there is increased scrutiny (Emont et al. 2025). China dominates the entire rare earths value chain. With China mining over 60 percent and processing over 80 percent of the world’s rare earths (REIA, 2025; Baskaran, 2024), and producing around 90 percent of the world’s high-performance rare earth magnets (Bradsher 2025), significant global dependence on a single country for these materials creates both economic vulnerabilities and strategic concerns. This article explores the implications of the current restrictions, the industrial relevance of the targeted elements, and how the situation can be understood through the lens of game theory. Specifically, our lens on this issue provides an understanding of why China reversed course in terms of restricting exports of rare earth products.

Date: 2025-10-07
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