Chinese rare earth suppliers are refusing to ship materials to U.S. customers for fear of retaliation from Beijing, highlighting the growing vulnerability of American supply chains to China’s control over critical minerals ahead of President Xi Jinping’s planned visit to Washington later this month.
Three people familiar with the trade told Reuters that some Chinese suppliers have declined to fulfil U.S.-bound orders, with several becoming more cautious about transactions that could expose them to scrutiny from Chinese authorities.
The development adds another layer to an already strained rare earth supply chain. The United States has repeatedly pressed Beijing to honor commitments reached in Busan and Beijing over the past year to facilitate the issuance of export licenses, but U.S. companies continue to face delays in obtaining supplies of strategically important minerals.
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The issue has become part of Washington’s preparations for Xi’s September 24 visit, according to a source familiar with the planning.
A handful of Chinese rare earth suppliers began refusing some shipments to U.S. companies after Beijing imposed sanctions in early August on the U.S.-based Responsible Business Alliance, or RBA, a major supply-chain monitoring organization.
The suppliers were concerned that complying with the due-diligence requirements of the Responsible Minerals Initiative, a mineral-supply-chain auditing programme associated with the RBA, could expose them to punishment from Beijing, one source with direct knowledge of the matter said.
Other Chinese companies had already stopped shipping certain materials to the United States in recent months to avoid becoming caught between Chinese export controls and U.S. restrictions. One source cited four cases in which Chinese companies declined to send material because they feared the products could ultimately be resold to customers or end users subject to U.S. restrictions.
The significance of the development lies in the way China’s rare earth policy is affecting private commercial decisions. Beijing does not need to block every shipment directly if suppliers, manufacturers and exporters become sufficiently concerned about the consequences of dealing with American customers. That can make the export-control system more powerful while also making supply chains less predictable.
A U.S. official, speaking on condition of anonymity, said the Trump administration continues to press Chinese officials to address what Washington regards as China’s failure to comply with the Busan agreement, along with other bilateral issues.
China’s Ministry of Foreign Affairs has said Beijing remains committed to maintaining global critical-mineral supply chains.
But the dispute is taking place against a backdrop of intensifying U.S.-China competition over technology, manufacturing and national security. Critical minerals have become an important part of that rivalry because rare earths and related materials are essential to products ranging from electric motors and electronics to advanced weapons, aircraft engines and high-performance magnets.
The vulnerability is acute because China dominates the global rare earth supply chain, including processing and magnet production. Reuters reported last month that China accounts for about 90% of global production of rare earth products, including magnets, leaving the United States and other industrial economies heavily dependent on Chinese processing capacity.
Supplies Remain Tight Despite Partial Recovery
China’s restrictions on rare earth exports introduced in April 2025 triggered concerns over shortages in the United States and other major industrial economies.
Exports of some rare earths and permanent magnets have since recovered, but access to several strategically important materials remains constrained. Prices for materials including yttrium, tungsten and other critical inputs used in defense, aerospace and semiconductor manufacturing remain elevated.
Yttrium illustrates the problem.
Chinese exports of yttrium oxide to the United States reached 29 metric tons in July, the second-highest monthly volume since Beijing introduced its export controls. The increase provided some relief to U.S. aerospace companies because yttrium is used in specialty alloys and high-temperature-resistant coatings for aircraft engines.
But the rebound has not restored normal supply. U.S. exports of yttrium remain roughly half their 2024 levels, according to Chinese customs data cited by Reuters, even as China continues shipping the material to other markets.
Some U.S. companies have waited more than six months for export licenses, according to two sources familiar with the situation.
“China has been very effective in using rare earth export controls to impose restraint on the Commerce Department’s Bureau of Industry and Security,” said Reva Goujon, a geopolitical strategist at Rhodium Group.
“Supply chain chokepoints will come into focus, but I would expect Beijing to loosen up critical raw material controls a bit around the summit to deflate U.S. allegations that Beijing is not upholding the Busan truce,” she added.
The recent increase in U.S.-bound yttrium shipments could support that possibility. Several U.S. companies have also recently received multiple licenses after lengthy waits, according to sources, raising expectations that Beijing could approve more shipments around the Xi-Trump meeting.
But even if approvals increase, the episode has exposed a structural weakness in the U.S. supply chain: Washington can negotiate for licenses, but it has limited control over the commercial decisions of Chinese companies that actually produce and export the material.
Japan Faces An Even Sharper Squeeze
The restrictions are not limited to the United States.
Chinese suppliers have been even more reluctant to ship critical minerals to Japanese customers, according to two sources familiar with the trade.
Chinese customs data show that China exported no terbium to Japan between January and August this year, compared with 20 tons during the same period last year. Gallium shipments fell 65%, while yttrium exports plunged 98%.
Terbium and gallium are used in small quantities in high-performance rare earth magnets and other advanced industrial applications.
Japanese companies have previously complained about delays in obtaining permits and lengthy customs inspections for critical minerals.
The squeeze demonstrates how Beijing can apply pressure selectively. Export controls do not necessarily have to affect every commodity or every country equally. Licenses can be accelerated for one market, delayed for another, and effectively withheld from a third, giving China considerable leverage over companies whose production depends on specific minerals.
Against that backdrop, there is growing uncertainty for manufacturers even when physical inventories have not yet reached critical levels. Companies must account not only for the availability of material but also for the possibility that future licenses could be delayed or that suppliers could refuse orders altogether.
A Broader Test for U.S. Supply-Chain Resilience
The dispute is increasingly forcing Washington to confront a difficult reality: building alternative mines is not enough to eliminate dependence on China.
The United States and its allies are investing in new mining, processing, and magnet-making capacity, while companies such as Lynas are expanding operations outside China. Lynas, the largest rare earth producer outside China, has been exploring additional supply deals and supporting the development of a U.S. rare earth magnet supply chain.
But creating a fully independent supply chain takes years because rare earth production involves mining, separation, refining, alloy production and magnet manufacturing. China has built dominance across much of that chain, meaning alternative suppliers must compete not only on access to ore but also on processing expertise, scale and cost.
The geopolitical stakes are consequently rising.
The latest supplier refusals show that China’s leverage extends beyond formal export bans. Beijing’s policies can influence how Chinese companies assess the risks of doing business with foreign customers, particularly when transactions involve supply-chain audits, sensitive end users or industries subject to U.S. national-security restrictions.
That could make the rare earth dispute more difficult to resolve than a conventional tariff disagreement.
The United States wants reliable access to materials essential to its aerospace, defense, energy and technology industries. China wants to preserve control over a strategically valuable part of its industrial base while resisting what it views as U.S. restrictions on Chinese companies and technology.
The result is a supply chain in which commercial transactions are shaped by geopolitical calculations.
However, it is not clear whether Beijing will ease licensing restrictions before or during Xi’s Washington visit as a gesture toward stabilizing the broader trade relationship. It is also not clear whether U.S. manufacturers can reduce their exposure sufficiently to make future Chinese export controls less disruptive.