In early April, China implemented restrictions on rare earth exports as retaliation against the US tariffs. These tariffs, imposed by the Trump administration, reached up to 145% on Chinese exports to the US.
In mid-May, following negotiations in Geneva, the US stated that China agreed to lift the restrictions. This agreement was part of a 90-day pause on tariffs that were disrupting trade between the two countries.
Despite the agreement, companies seeking to export rare earths still require licenses from China. Reuters reported that Beijing granted temporary licenses to suppliers of the three major US automakers.
A survey by the American Chamber of Commerce in China revealed that three-quarters of the affected companies anticipated their supplies would deplete within three months. The survey also noted uncertainty due to a large backlog of license applications.
Gracelin Baskaran, a mining economist, stated that approximately 25% of license applications have been approved. She also noted that the processing speed is insufficient.
China possesses 100% of the world's rare-earth processing capability. This allows China to use the licenses as leverage in trade negotiations.
The US was the dominant rare-earth producer until the 1990s. China increased production, making it unprofitable for others. The US is currently working to build its own rare earth processing capabilities.
The ongoing restrictions could affect various US industries. These industries include autos, electronics, semiconductors, and defense.