China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains

Gracelin Baskaran

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In advance of President Donald Trump’s upcoming visit to South Korea later this month—where he is expected to meet Chinese President Xi Jinping for the first time since 2019—China announced that it has expanded its restrictions on rare earth and permanent magnet exports. The Chinese Ministry of Commerce’s Announcement No. 61 of 2025 implements the strictest rare earth and permanent magnet export controls to date. The move both strengthens Beijing’s leverage in upcoming talks while also undercutting U.S. efforts to bolster its industrial base.

Q1: What is new about today’s rare earth and permanent magnet export restrictions?

A1: The new export controls mark the first time China has applied the foreign direct product rule (FDPR)—a mechanism introduced in 1959 and long used by Washington to restrict semiconductor exports to China. The FDPR enables the United States to regulate the sale of foreign-made products if they incorporate U.S. technology, software, or equipment, even when produced by non-U.S. companies abroad. In effect, if U.S. technology appears anywhere in the supply chain, Washington can assert jurisdiction.

Under the measures announced today, foreign firms will now be required to obtain Chinese government approval to export magnets that contain even trace amounts of Chinese-origin rare earth materials—or that were produced using Chinese mining, processing, or magnet-making technologies. The new licensing framework will apply to foreign-produced rare earth magnets and select semiconductor materials that contain at least 0.1 percent heavy rare earth elements sourced from China.

Given China’s dominance in the sector—accounting for roughly 70 percent of rare earth mining, 90 percent of separation and processing, and 93 percent of magnet manufacturing—these developments will have major national security implications.

Q2: What do the new restrictions mean for the defense and semiconductor industries?

A2: Rare earths are crucial for various defense technologies, including F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, Predator unmanned aerial vehicles, and the Joint Direct Attack Munition series of smart bombs. The United States is already struggling to keep pace in the production of these systems. Meanwhile, China is rapidly scaling up its munitions manufacturing capacity and acquiring advanced weapons platforms and equipment at a rate estimated to be five to six times faster than that of the United States.