Europe has once again been reminded of its dangerous dependence on others for critical raw materials. China’s latest move to impose fresh restrictions on rare earth exports has reignited fears of a new trade war—one that could shake the foundations of Western technology and defense industries.
This decision strikes at the very core of Europe’s industrial ambitions. Rare earth elements are essential for producing semiconductors, electric vehicles, renewable energy systems, and advanced military technologies. Yet, as Beijing tightens its control, Europe finds itself with few options to respond.
China’s Long Game in Rare Earth Dominance
Beijing’s latest measures are not an isolated act—they’re the culmination of a decade-long strategy. After years of watching the West weaponize control over global trade chokepoints, China has learned to respond in kind. Its dominance of the rare earth supply chain is no accident; it’s the result of strategic planning and Western neglect.
Back in 2010, when China suspended rare earth exports to Japan over a territorial dispute, Tokyo’s auto industry ground to a halt. Japan took the lesson seriously, stockpiling minerals and investing in Australian mines to secure future supply. Europe and the U.S., however, largely ignored the warning.
Today, China commands around 70% of global rare earth mining and a staggering 93% of processing capacity. After 2010, it consolidated all major operations into the China Rare Earth Group, a state-controlled giant designed to centralize power and pricing. Beijing’s 2015 “Made in China 2025” plan prioritized self-sufficiency in critical minerals, while its 2020 Export Control Law gave the government authority to restrict exports on national security grounds. In the past two years, that list of restricted materials has expanded dramatically.
The New Rules: A Direct Hit on the West
China’s newest restrictions go even further. Any magnet or product containing Chinese-sourced rare earths—or even manufactured using Chinese technology—now requires government approval before export. This policy mirrors the U.S.’s Foreign Direct Product Rule (FDPR), which Washington used to cripple Huawei’s global business.
Beijing’s adaptation of this rule appears targeted squarely at the West’s defense industry. Companies with links to foreign militaries are unlikely to receive export licenses, effectively blocking Chinese-origin materials from entering Western defense supply chains.
For Europe—already struggling to rebuild its military strength amid Russia’s aggression—this poses a severe risk. The defense sector depends heavily on high-performance magnets, sensors, and batteries—all reliant on rare earths that China can withhold at will.
Western Response: Too Little, Too Late?
In recent years, both the U.S. and EU have begun scrambling to reduce their dependence on Beijing. The U.S. Critical Minerals Strategy, launched under the Trump and Biden administrations, aims to establish a fully domestic mine-to-magnet supply chain by 2027. The EU Critical Raw Materials Act (2023) set ambitious targets to mine at least 10% of its critical minerals and process 40% by 2030.
Yet, progress remains painfully slow. America’s only rare earth producer, MP Materials, yields in a year what China produces in a single day. Even if new deposits are discovered, it takes decades to bring new mines online—and Western companies often lack the processing technology that China has perfected and now restricts from export.
This imbalance gives Beijing immense leverage. With control over supply and pricing, China can easily squeeze competitors out of the market, ensuring continued global dominance.
A High-Stakes Gamble Before the Xi–Trump Summit
Some analysts view China’s latest escalation as strategic brinkmanship ahead of the upcoming Xi–Trump summit in South Korea. Beijing claims the new export curbs are a response to Washington’s tightening technology restrictions—moves it says violate recent trade agreements.
While Trump has threatened sweeping tariffs on Chinese imports, he has also hinted at a potential deal. China, confident in its command over critical minerals, may believe it can force concessions from the U.S. and its allies.
The Harsh Reality for Europe
Europe’s “wake-up call” has come too late. The continent’s green transition, digital transformation, and defense readiness all hinge on resources that it barely controls. Until the EU and its partners can secure independent supply chains—through domestic mining, partnerships with allies like Australia, or recycling initiatives—Beijing will continue to hold the upper hand.
China’s grip on rare earths is no longer just an economic advantage; it’s a strategic weapon in the new era of global competition. Europe, caught between superpowers, must now decide whether to act decisively—or remain dangerously exposed.
