Key facts
- China's April 2025 export restrictions on heavy rare earths and permanent magnets disrupted global supply chains.
- A subsequent agreement suspended these restrictions for one year.
- U.S. imports of rare earths have not recovered to pre-restriction levels, unlike European imports.
- Prices for dysprosium, used in EV motors, have risen dramatically outside of China.
- The U.S. has implemented significant industrial policy, including financing and price floors, in response to supply chain fragility.
Prices for rare earth elements, critical for electric vehicle motors and other industrial applications, have surged significantly outside of China. This price escalation is attributed to Chinese trade restrictions that have created substantial disruptions in global defense and industrial supply chains, while having a minimal effect on China's domestic market.
China's initial export restrictions on heavy rare earths and permanent magnets in April 2025 triggered immediate supply chain disruptions for allied nations. Following a temporary 90-day truce, China reimposed even stricter measures, including a foreign direct product rule and an embargo on technology transfer. However, a subsequent agreement between President Trump and President Xi Jinping suspended these restrictions for one year.
Despite the resumption of exports, the flow of rare earth materials has been volatile. U.S. companies have experienced greater disruption, with imports failing to recover to pre-restriction levels seen in 2024, in contrast to European imports which have rebounded. For instance, while shipments to Europe increased significantly in November 2025, U.S. imports declined.
The U.S. has responded with substantial domestic industrial policy, including billions in financing, price floors, and guaranteed government offtake. International partnerships with countries like Australia, Japan, Malaysia, and Saudi Arabia are also being developed to build resilience. However, achieving true supply chain resilience will require sustained output, diversification, and private investment.