China has once again turned its dominance in rare earth minerals into a weapon of economic retaliation. On June 22, 2026, Beijing added 10 U.S. entities with alleged military ties to its export control list. Among them sit two prominent American rare earth companies: MP Materials, which runs the only active rare earth mine in the United States, and USA Rare Earth. A specialized motor manufacturer called Aveox joined them on the list.
The move came just weeks after Washington placed major Chinese firms including Alibaba, Baidu, BYD and NIO on its own restricted list for allegedly supporting Beijing’s military. China’s Commerce Ministry wasted little time. It declared that organizations anywhere are prohibited from transferring or supplying dual-use items originating in China to these entities. Any ongoing export activities must stop immediately. The ministry framed the action as necessary to safeguard national security, protect its interests and meet non-proliferation duties in response to what it called the “U.S. government’s malicious practice.”
But this isn’t an isolated incident. It fits into a pattern that began more than a year earlier. In April 2025, China imposed licensing requirements on seven medium and heavy rare earth elements. Those included terbium, dysprosium, samarium, gadolinium, lutetium, scandium and yttrium. These materials matter deeply for high-performance magnets used in fighter jets, electric motors, wind turbines and semiconductors. The restrictions followed Trump administration tariffs and semiconductor curbs. They quickly exposed how little progress the U.S. had made in reducing dependence on Chinese supply chains.
One year on, the damage lingers. U.S. imports of rare earth magnets have never recovered to 2024 levels. European imports rebounded strongly. In November 2025, magnet exports to Europe jumped 60 percent year over year while shipments to the United States fell 11 percent, according to customs data analyzed by the Center for Strategic and International Studies (CSIS). The disparity speaks volumes. Even when Beijing eased some rules, American buyers faced tighter scrutiny.
Yttrium offers a stark example. Aerospace manufacturers rely on it for thermal barrier coatings that keep jet engines from melting. From April to December 2025, China shipped only 17 tons of yttrium to the United States. That compares with 333 tons exported in the eight months before the restrictions hit. February 2026 saw a modest rise to 20 tons. Still far below the more than 66 tons recorded in January 2025. Industry sources told Reuters that some aerospace firms have begun rationing the material. Production pauses loom if supplies don’t improve (Reuters).
October 2025 brought even tougher measures. China added five more rare earth elements. It introduced rules requiring licenses for any foreign-made product containing 0.1 percent or more of Chinese-origin rare earths or produced with Chinese processing technology. The extraterritorial reach mirrored aspects of U.S. foreign direct product rules. Beijing also restricted exports of rare earth mining, smelting and magnet manufacturing technology. Chinese personnel were barred from assisting foreign projects without approval.
Those October controls were suspended for one year as part of a Trump-Xi trade truce. Yet the April 2025 licensing requirements on the original seven elements stayed in place. The June 2026 announcement targeting specific U.S. firms shows the architecture remains intact and ready for selective enforcement. MP Materials and USA Rare Earth now face a full ban on dual-use items from China rather than mere licensing delays. The distinction matters. MP Materials operates Mountain Pass in California and has received Pentagon support to build out domestic magnet capabilities. USA Rare Earth works on mine-to-magnet projects. Disrupting their access to Chinese inputs or technology could slow American efforts precisely when they appear to be gaining traction.
Beijing has played this game before. It controls over 90 percent of global rare earth processing capacity. That position gives it leverage few other nations enjoy. When the U.S. moves against Chinese tech or auto companies, Beijing answers by squeezing critical minerals. The latest finance ministry action bars Chinese buyers from products made by an additional 46 U.S. companies, though it exempts U.S.-funded operations inside China. The carve-out reveals a calculated approach. Hurt American competitors without fully isolating foreign investment that benefits the Chinese economy.
American officials have repeatedly pressed for relief. In May 2026, the White House said China agreed to address U.S. concerns over rare earth shortages. The statement dropped earlier language about eliminating Beijing’s export control regime entirely. It also flagged indium shortages for the first time, noting the metal’s importance for next-generation chips. Chinese officials responded that they would cooperate on “reasonable” concerns while defending their controls as lawful (Reuters).
Yet data tells a different story. U.S. Trade Representative Jamieson Greer acknowledged in May 2026 that Beijing still drags its feet on some licenses. American companies sometimes need intervention from U.S. officials to secure approvals. The licensing process itself remains opaque and slow by design, according to multiple industry participants. European Parliament researchers reached similar conclusions in their 2025 analysis, noting that the selective approval system allows China to reward friendly buyers and punish others (European Parliament).
The broader pattern extends beyond rare earths. Recent reporting shows China quietly expanding export controls to other choke points affecting U.S. industries. Investors, business leaders and supply chain analysts describe a strategy of incremental pressure that reaches semiconductors, batteries and advanced materials. The Washington Post detailed these moves in mid-June 2026, just days before the latest rare earth announcement (The Washington Post).
For U.S. defense contractors the situation feels urgent. The Pentagon has set a January 2027 deadline for sourcing certain rare earth materials entirely outside China. Current shortages of yttrium already threaten engine production. Semiconductor makers face delays in advanced chip lines that depend on ultrapure rare earth derivatives. Automotive suppliers building electric motors watch magnet prices and availability with rising anxiety.
Efforts to build alternatives continue. The Trump administration has taken equity stakes in MP Materials and other miners. Processing facilities are under construction in Texas and elsewhere. Yet scaling these operations takes years. China’s processing expertise, built over decades, cannot be duplicated overnight. And every licensing delay or selective ban adds friction that favors Beijing in the short term.
Chinese rare earth magnet producers have found some workarounds. They tweak formulas to avoid restricted elements or embed magnets inside finished motors to classify shipments differently. Such adaptations show the system isn’t airtight. But they don’t eliminate the uncertainty. Western buyers still face compliance risks and higher costs.
So the June 2026 measures land with particular force. By naming MP Materials and USA Rare Earth directly, China signals that even Pentagon-backed projects sit in its crosshairs. The ban on dual-use exports removes the gray area that licensing once provided. Companies must now navigate a harder line. And the message to other nations is clear. Cooperate with U.S. efforts to decouple at your own peril.
Washington’s response will likely involve more subsidies, more stakes in domestic producers and renewed diplomatic pressure. Whether those steps can accelerate supply chain diversification before the next escalation remains an open question. One thing looks certain. Rare earths have become a permanent feature of U.S.-China strategic competition. Each new restriction tightens the vise. Each retaliatory list raises the stakes.
Industry insiders tracking these developments see a long contest ahead. China holds the processing advantage. The United States possesses some of the richest undeveloped deposits and growing political will to fund alternatives. The outcome will shape military readiness, clean energy deployment and technological leadership for years to come. For now, the latest Chinese action reminds everyone who controls the tap.
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