Key facts
- China's rare-earth exports to Japan fell by approximately 50% in the first half of 2026.
- Exports to the U.S. decreased by nearly 30% during the same period.
- These reductions are attributed to China's use of critical resources for economic and diplomatic leverage.
- The U.S. has implemented significant domestic industrial policy and formed international partnerships to counter these disruptions.
China's rare-earth exports to Japan and the United States have significantly declined in the first half of 2026, with shipments to Japan halving and to the U.S. falling by nearly 30%. This trend highlights Beijing's strategy of leveraging its dominant position in critical resource production for economic and diplomatic advantage.
These export restrictions, initially imposed in April 2025, disrupted global defense and industrial supply chains, which remain heavily reliant on Chinese supply. The U.S. responded with substantial domestic industrial policy, including billions in financing, price floors, and guaranteed government offtake, alongside bilateral partnerships with countries like Australia and Japan. A 90-day truce was negotiated to restart exports, followed by stricter Chinese measures in October 2025, just before a meeting between President Trump and Chinese President Xi Jinping. Ultimately, an agreement was reached to suspend export restrictions for one year.
Despite the resumption of exports, the flow of materials has been volatile, with uneven licensing favoring certain countries. U.S. companies have reported more significant disruptions compared to European manufacturers, as U.S. imports have not fully recovered to pre-restriction levels seen in 2024. Building fully integrated, mine-to-magnet supply chains outside of China is identified as crucial for long-term resilience, a process expected to take years and require substantial capital and allied coordination.