As of last year, China developed targeted controls over nearly 99% of the global capacity of rare earth elements (REEs). Then in April 2025 China introduced a sophisticated new licensing regime, requiring pre-approval for exports of medium and heavy rare-earth elements (REEs), including dysprosium and terbium, strategically targeting the US defense supply. Nicknamed a “license wall,” this regulatory tool gives Beijing a measured and effective means to choke or permit shipments at will, without resorting to blunt bans, according to Defense One’s Tye Graham and Peter Singer.
Beijing’s goal is to create deliberate choke points in its ongoing great power competition with the United States. It is intended specifically to deter Washington from acquiring the REEs needed for US national security and commercial markets. The Chinese licensing system focuses on heavy REEs indispensable for advanced defense systems, mirroring earlier curbs on gallium, germanium, and graphite.
“Chinese authorities can approve, delay, or deny shipments case by case, tightening or loosening supply without triggering WTO violations or permanent disruptions. The system is potent enough to cause ‘full panic’ in targeted industries and government ministries, and flexible enough for targeted application,” according to Graham and Singer. Last month, China used it to grant quiet, temporary six-month export licenses to suppliers of major US automakers as a diplomatic gesture. China can today, at will, decide the amount the US and other countries will be granted.
Ruling Chinese Communist Part (CCP) elites in Beijing, led by President Xi Jinping, plan to continue weaponizing REEs as strategic tools. With more than a decade-long history, it follows a precedent it set in 2010, when China embargoed REE exports to Japan during a maritime dispute. It crippled Japanese high-tech sectors and illuminated the geopolitical leverage embedded in resource control, says Graham and Singer.
Medium and heavy REEs underpin technologies essential to US defense: high-strength magnets for F-35 jets, Virginia-class submarines, hypersonic weapons, missile guidance systems, satellite communication hardware, radar amplification, and laser targeting systems, according to the Modern War Institute.
The Defense Department needs these critical REEs to avoid shutting down production of key platforms. Beijing’s new licensing regime arrives at a time when China already is outpacing the US in the production of submarines, ships, and other advanced weapons systems. The license-wall effectively gives China a discretionary veto over critical US materiel flows in times of heightened political tension between the two great powers.
The Trump administration has responded with a bold industrial-policy pivot centered on MP Materials, operator of the sole active REE mine in the U.S. It owns the large Mountain Pass mine in California. The Pentagon, according to the Guardian’s Ross Wilkers this week, has become MP’s largest shareholder, investing $400 million and committing to a ten-year purchase agreement for magnets from MP’s forthcoming “10X” facility.
By anchoring domestic magnet production and shielding MP from low-price competition with Chinese suppliers, the price floor repositions US capabilities as sustainable, even as global buyers face rising REE prices, according to John Zadeh of Discovery Alert. The road to actual refinement capacity inside the US, however, remains a lengthy one.
China’s REE export policy reflects its long-term campaign to dominate the global REE supply chain by leveraging subsidies, vertical integration, and geopolitical investment abroad in its Belt and Road Initiative. Today, China controls about 70% of the global share of mined REEs and it refines more than 85%, giving it strategic leverage over the United States. President Trump faces a critical decision. He must decide to treat REEs as a strategic asset or Washington remains dependent on China’s largesse for at least the next several years. The Pentagon’s recent investment in REEs appears to mark a shift from earlier reliance on tax incentives to direct market intervention under authorities like the Defense Production Act. Washington needs to treat REEs as a national security priority, building stockpiles, streamlining permitting, and investing in workforce capabilities.
The Trump Administration is taking the first step, but it also needs to recognize that China’s April 2025 licensing regime is far more than a minor export policy tweak. It is a calibrated geopolitical instrument designed to control access to rare-earth materials vital to US advanced military systems.
Over the next five years, the country will face intensifying pressure to secure its defense-industrial base against REE supply chain manipulation. If Beijing continues to refine its license-wall strategy by imposing quotas, denying licenses, or tightening technical documentation requirements, Washington could see cascading delays in the production of critical military hardware, from jet engines to missile guidance systems. This could degrade combat readiness and delay force modernization during a critical period when war with China is a real possibility. Without swift and strong action, the US may find itself in a geopolitical paradox: technologically superior but materially vulnerable.
Daria Novak served in the U.S. State Dept.
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