Delays in export licensing and lack of alternatives threaten multiple sectors. Donald Trump and Xi Jinping spoke this week, with a “very positive outcome for both countries.”
From critical minerals to industry vitamins, various terms are used to describe rare earth elements, a group of 17 chemical elements with magnetic and electrochemical properties of extreme economic, industrial, and technological importance.
Despite their name, many of these elements are more common than lead and copper. Their rarity comes from being dispersed throughout the Earth’s crust in thin layers and small quantities, mostly mixed with other minerals. As a result, their extraction and filtering is laborious, costly, and has severe environmental impacts.
Rare earth elements are used in many sectors such as telecommunications, green technologies, electronics, industry, medicine, defense, and energy. They play a fundamental role in the manufacture of various electronic products, electric vehicles, weaponry, aerospace industry, and petroleum refining. Today, it is almost impossible to find a piece of modern technology that does not contain a rare earth element. The largest exporter of rare earths is China, which holds about 49% of the world’s reserves and processed 99% of the heavy rare earths used in 2024.
However, since early April, the Chinese government has imposed restrictions on the export of seven rare earth elements. The decision, made by Xi Jinping, President of China, was presented as retaliation against tariffs imposed by U.S. President Donald Trump. The impact was immediate and reactions escalated, prompting factories worldwide to appeal to Beijing for understanding before production halts and local economies worsen.
Last Wednesday, June 4, several automotive industry factories expressed urgency to discuss and resolve the situation. According to Reuters, many companies are close to exhausting the materials needed to sustain production, which will cause delays and cuts in products. On the same day, CLEPA, the European Association of Automotive Suppliers, warned that several factories and production lines have already shut down due to lack of materials. The same plea was made by the European Union Chamber of Commerce in China on June 6, highlighting that delays in export license approvals and lack of transparency are negatively impacting production lines worldwide.
Diplomats, automakers, and executives from various countries have urgently sought meetings with Beijing to pressure for faster approval of these material requests. “If the situation is not resolved quickly, delays or even production stoppages can no longer be ruled out,” warned Hildegard Mueller, director of the German Automotive Industry Association, who joined complaints made this week by other European, Indian, and American companies.
Trump and Xi Jinping Reach “Very Positive Conclusion”
At the end of May, Donald Trump criticized the slow licensing requirements for exporting critical minerals, calling it a violation by the Chinese leader of agreements made in Geneva. Meanwhile, the two presidents spoke by phone on Thursday, June 5, in a call lasting nearly an hour and a half. The full details are not yet known; it is only confirmed they discussed the trade agreement between the two powers and difficulties in licensing rare earth exports.
Later, Donald Trump wrote on his social network Truth Social: “The conversation lasted approximately an hour and a half and resulted in a very positive conclusion for both countries. There should no longer be any doubt about the complexity of rare earth products.” The Chinese leader emphasized that he has complied with the agreements made in Geneva and asked the United States to remove the “negative measures” that triggered the trade war between the two countries. Both Xi Jinping and Donald Trump promised to meet in person to discuss the issue; however, no date or location has been set yet, despite mutual invitations to visit each other’s countries.
On Friday, June 6, Reuters reported that China granted temporary export licenses to rare earth suppliers for the three largest U.S. automakers: General Motors, Ford, and Stellantis. While GM and Ford did not comment, Stellantis admitted it is working with suppliers “to ensure an efficient licensing process,” having managed to “address immediate production concerns without major disruptions.” Details of this decision remain unclear, but two Reuters sources said some of the temporary licenses are valid for six months.
China Promises Transparency and Stability for Companies
The European Union Chamber of Commerce in China acknowledges some recent improvements in export licensing but says they are still insufficient. The Chinese government has already stated that it “aims to provide a fair, stable, transparent, and predictable political environment for businesses.”
However, on Thursday, Reuters reported that China has been implementing a tracking system, mainly for magnetic components of rare earths. According to three news agency sources, this system, introduced in the last week of May, requires producers to submit additional information, including trade volumes and customer names. This tool aims to strengthen Chinese control over the sector, where it holds an almost monopoly on production, and to crack down on smuggling, illegal mining, and tax evasion.
The issue will continue to be discussed. This month, a business delegation from Japan is scheduled to meet with the Ministry of Commerce in Beijing, and next month there will be a summit with European leaders. The scheduling of the in-person meeting between Xi Jinping and Donald Trump is still awaited.
Source: Diário Económico
