Rare Earths: China’s Control and Its Impacts
Rare earths are a group of metals that are essential for many modern technologies, including electric motors, electronics, electric vehicles, and defense systems. China controls over 90% of the global processing capacity for these raw materials and uses this position as a geopolitical tool.
China’s Export Controls
In April 2025, China implemented export controls on seven key rare earths, including samarium, dysprosium, and yttrium. These measures were justified as a response to US tariffs but also affect Europe and other regions. The controls remain in place despite a 90-day ceasefire in the US-China trade dispute.
Impacts on the Automotive Industry and Global Supply Chains
The Chinese export restrictions have already led to supply shortages that impact production in the automotive industry and other sectors. Many companies have exhausted their supplies and now have to scale back production. This affects not only Germany and the Eurozone but also global supply chains, as rare earths are essential for the construction of electric motors and other components.
Geopolitical Consequences
China’s dominance in the rare earth sector allows Beijing to use these raw materials as a geopolitical pressure tool. This creates uncertainties in the global economy and forces other countries to seek alternative sources of supply or form strategic partnerships.
Possible Solutions
To reduce dependency on Chinese rare earths, countries like Germany and the EU could take the following steps:
- Diversification of Supply Sources: Investing in the extraction and processing of rare earths in other regions, such as Africa or South America.
- Recycling and Efficiency Improvements: Enhancing recycling technologies for rare earths and developing more efficient products that require less of these raw materials.
- Strategic Partnerships: Forming alliances with countries that have their own rare earth resources to reduce dependency on China.
These measures could help minimize risks from China’s export controls and stabilize the global supply of rare earths.