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A Fragile Truce Amid a Critical Minerals Crisis

A long-anticipated call between U.S. President Donald Trump and Chinese President Xi Jinping on Thursday raised hopes for progress—but it failed to bring relief to a looming global crisis. At the heart of the issue lies a worsening shortage of rare earth elements and other critical minerals, materials essential for everything from electric vehicles and smartphones to advanced military equipment.

Industry leaders warn that unless supply chains are restored swiftly, production lines across the U.S., Europe, and Asia could grind to a halt as early as this summer.

The Mineral Monopoly: China’s Dominance and the Global Dependence

China currently controls nearly 60% of global rare earth mining and over 85% of processing capacity, according to the International Energy Agency. These minerals—such as neodymium, dysprosium, and praseodymium—are critical in the manufacturing of magnets used in EV motors, wind turbines, and defense systems.

In April 2025, China imposed new export controls on seven rare earth elements, following similar moves over the past two years. While no direct link to U.S. tensions was stated, the move came amid intensifying trade friction. The restrictions were further reinforced shortly after a May 12 trade agreement between Washington and Beijing that was expected to ease tensions, including a 90-day rollback on tariffs and countermeasures.

Instead, China's Ministry of Commerce announced on the same day that it would tighten export scrutiny—not relax it.

Business Impact: U.S. Companies Left in Limbo

According to a May 23–28 survey by the American Chamber of Commerce in China, only a fraction of U.S. companies had received six-month export licenses from Chinese suppliers. Of the companies affected by the controls:

• 75% reported they will exhaust their existing rare earth supplies within three months.
• Most impacted sectors include industrial R&D, manufacturing, and high-tech industries—not consumer goods.

President Trump, after Thursday’s call, maintained optimism:

“We’re in very good shape with China and the trade deal,” he told reporters. “We’re ironing out some specifics, especially around rare earth magnets.”

He offered no timeline or specifics. Meanwhile, U.S. officials—including Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer—are expected to resume discussions with their Chinese counterparts.

Europe and Japan Also Feeling the Pressure

The crisis is not confined to the United States. European auto parts manufacturers have already begun suspending operations, warned CLEPA, the European Association of Automotive Suppliers. As of early June:

• Only 25% of the hundreds of submitted export license applications from European companies had been approved.
• Some European firms received partial easing of restrictions, according to the European Union Chamber of Commerce in China. But the Chamber warned that approval delays and opacity are causing serious supply chain disruptions.

“We’re now seeing direct production line interruptions across multiple countries,” said Jens Eskelund, president of the European Chamber.

Japan has also begun to feel the pinch. Suzuki Motor, one of the country’s largest automakers, was forced to temporarily halt production of its Swift model due to shortages in rare earth supply, Reuters reported. Production is only expected to resume partially around June 13.

China’s Position: Strategic Controls, Not Retaliation

China maintains that its actions are non-discriminatory and aligned with international standards. “China’s export control measures are consistent with universal practices,” said Foreign Ministry spokesperson Lin Jian in response to questions about Japan’s production issues.

The Ministry of Commerce added that all export licenses are reviewed under “compliant and convenient trade regulations.” Still, lack of clarity and speed in the process continues to frustrate international businesses.

The Bigger Picture: Expanding Export Controls and Global Vulnerability

China’s grip over critical minerals has widened dramatically:

• August 2023: Export controls on gallium and germanium, metals crucial for semiconductors.
• 2024: Restrictions added on antimony, used in batteries and military applications.
• Late 2024: Broad measures implemented on materials with dual military-civilian use, including tungsten.

Tungsten, nearly as hard as diamond, is critical in aerospace, industrial machining, and defense. With only 300 grams per vehicle, most of it is unrecoverable during recycling, said Martin Hotwagner, an analyst at Steel & Metal Market Research.

“If no new supply lines open, Western automakers will begin running out of tungsten by late summer 2025,” Hotwagner warned.

Strategic Shifts: What’s Next for Global Supply Chains?

According to Jianwei Xu, senior economist at Natixis, the core conflict is no longer about tariffs:

“Both nations now realize their Achilles’ heels lie in non-tariff dependencies—especially in tech and rare earths.”

He predicts a likely tit-for-tat: China may speed up rare earth export approvals for industrial use if the U.S. eases tech export restrictions, including advanced semiconductor equipment.

In the longer term, the U.S., EU, and Japan are racing to diversify rare earth supply chains:

• The U.S. Department of Energy has committed over $200 million to support domestic rare earth extraction and processing.
• The EU has identified 34 critical raw materials and aims to meet 30% of its rare earth demand domestically by 2030.
• Japan is expanding partnerships with Australia and Vietnam, both of which have sizeable rare earth reserves.

Diplomatic Signals, But No Short-Term Relief

While the Trump-Xi call signaled ongoing dialogue, it failed to unlock immediate solutions for industries facing supply collapse. With only limited export licenses issued, and production lines already being paused, global manufacturers are operating on borrowed time.

The critical minerals squeeze is no longer a distant geopolitical issue—it’s now a direct threat to jobs, products, and economic resilience across continents. Without swift bilateral cooperation or alternative sources coming online, the world may soon face its most severe industrial disruption in years.