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hydrogen

EU Sounds Alarm Over Rare Earth Restrictions as China Tightens Export Controls

Anela DoksoBy Anela Dokso18/06/20253 Mins Read
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As Europe races to decarbonize and reindustrialize simultaneously, a bottleneck in rare earth mineral supply is threatening its high-tech sectors at a precarious moment.

European Trade Commissioner Maroš Šefčovič has called out China’s recent export licensing regime for rare earths and magnets, warning of “alarming” supply disruptions that could halt automotive and other industrial production lines within weeks.

China, which supplies roughly 90% of the global rare earth market, imposed new export controls in April that include seven key elements and several types of permanent magnets. These restrictions were introduced days after the U.S. levied “reciprocal tariffs” on Chinese goods, but their impact has rippled far beyond the intended target. European firms now find themselves caught in an administrative chokehold, with vital shipments stalled and no clear path to resolution.

Rare earth elements such as dysprosium, terbium, and gadolinium are crucial for producing magnets used in electric vehicles, wind turbines, smartphones, and military hardware. While Beijing’s policy formally aims to limit exports of dual-use technologies, the practical fallout has been widespread. Companies across Europe report being asked for sensitive intellectual property data to obtain licenses, while others face indefinite delays due to unclear application requirements.

The slowdown is already prompting warnings from Europe’s auto sector, which is particularly exposed due to its reliance on neodymium-iron-boron (NdFeB) magnets used in electric drivetrain systems. Šefčovič relayed that some carmakers have signaled imminent production constraints unless the flow of rare earth materials resumes.

At the core of the dispute lies the classification of rare earths as potential “dual-use” goods—a designation that triggers national security screenings. The EU is lobbying for exemptions on civilian production and for general licenses that could cover year-long procurement rather than case-by-case approvals. For manufacturers, this would significantly reduce compliance burdens and ensure continuity in supply chains.

In parallel to its negotiations with Beijing, the European Commission is accelerating efforts to de-risk its reliance on Chinese minerals. On Wednesday, the EU announced 13 international projects aimed at improving access to rare earths and critical minerals, spanning Africa, the Americas, and Central Asia. Notably, two of the projects focus specifically on rare earth mining in Malawi and South Africa—an implicit acknowledgment that China’s dominance in this domain has become a geopolitical vulnerability.

The rare earth standoff is unfolding against a broader backdrop of worsening EU-China trade relations. Earlier this week, Brussels moved to bar Chinese suppliers from its €120 billion medical devices procurement market, citing lack of reciprocal access. It also proposed a €2 import fee on low-value e-commerce packages from platforms like Shein and Temu to combat perceived undercutting of domestic retailers.

Meanwhile, China maintains that EU measures—ranging from carbon tariffs to anti-subsidy investigations—violate the rules of the World Trade Organization. From Beijing’s perspective, Europe’s push for strategic autonomy looks increasingly like protectionism.

Europe’s demand for rare earths is only expected to grow. The European Raw Materials Alliance projects a fivefold increase in the need for rare earth magnets by 2030. Yet, the bloc produces virtually none of these minerals domestically, and its refining capabilities remain nascent. Without rapid progress in sourcing and processing alternatives, Brussels may find itself forced to navigate continued supply friction with a trading partner it increasingly mistrusts.


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