China tightened its grip on the export of rare earth minerals and related technologies, escalating tensions with Washington ahead of an expected meeting between President Donald Trump and Chinese leader Xi Jinping later this month.
China Says New Rules To Protect ‘National Security’
Foreign companies will need approval to export magnets that contain even trace amounts of Chinese-sourced rare-earth materials, or that were produced using the country's extraction methods, refining, or magnet-making technology, according to a notice published by the Ministry of Commerce (MOFCOM) on Thursday.
China controls about 70% of rare-earth mining, 90% of separation and processing, and 93% of magnet manufacturing, according to an analysis by the Financial Times.
MOFCOM said the new measures were intended to "protect its national security and interests" and prevent the "misuse of rare-earth materials in military and other sensitive sectors".
Applications involving the development and production of advanced computing, memory chips, or artificial intelligence with potential military uses will be evaluated individually on a case-by-case basis, the ministry added.
US Eyes Alternatives, Tech Giants Brace For Impact
China’s control over rare earth exports has been a contentious issue in its trade talks with the U.S, given their critical role in various industries, from electric vehicles and AI to missiles and drones. The country’s latest tightening measure could impact tech giants like Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Tesla (NASDAQ:TSLA).
The U.S. has been working to secure its rare earth supply chain and explore alternatives, with economist Craig Shapiro asserting that this situation is fixable at a manageable cost.
Earlier this month, Pakistan shipped its first batch of enriched rare earth elements and critical minerals to the U.S., marking the beginning of a $500 million partnership.
The U.S. government’s direct equity stakes in major miners such as MP Materials Corp (NYSE:MP) have also opened up new opportunities for investors in rare earth and strategic metals ETFs.
This includes ETFs like VanEck Rare Earth/Strategic Metals (NYSE:REMX), Global X Lithium & Battery Tech (NYSE:LIT), and iShares U.S. Basic Materials (NYSE:IYM), which are set to benefit from a boom in domestic production efforts.
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