Joris Teer / Dec 2025
Image: Shutterstock
Talk of a US-China ‘trade truce’ has sent a ripple of relief through Brussels and Member State capitals. EU officials hope that Beijing’s pledges to ease export curbs on rare earths and other strategic materials will result in more stable supply. But Beijing’s promises are laden with technical caveats and shrouded in bureaucratic vagueness. A renewed false sense of security could lull Europe into complacency. A temporary relaxation of China’s disruptive export controls on heavy and medium rare earths, gallium, germanium, graphite and other materials, may occur, but only if Beijing abides by its promises. Meanwhile, although President Trump may prefer short-term stability at least until his planned meeting with Xi Jinping in April, many factors could still undo any US-China trade ceasefire (if such a truce materialises in the first place). In designing their de-risking policies, European policymakers should assume that China will continue to curtail critical material supply to European and partner industries.
The squeeze
Throughout 2025, Beijing sharply curtailed exports of critical raw materials (CRM) to Europe and most other countries. These building blocks are essential for manufacturing vital goods across key sectors, including anything from pacemakers to wind turbines, from drones to energy grids. The EU Chamber of Commerce in China (EUCCC) reports that China’s Ministry of Commerce approved less than 15% of licence applications for rare earths by EU firms, leading to 7 production stoppages in August and a further 46 expected stoppages in September.
But Beijing leveraged its export controls across materials more broadly, for example by making the granting of licences contingent on foreign companies supplying commercially and militarily sensitive information about their products and clients. Similarly, over the summer Beijing coerced its trading partners, seeking concessions in other policy areas such as the removal of modest EU protective trade measures like import duties on electric vehicles. Likewise, China undermined their industrial and especially defence production capacity, while the threat of an even more severe future squeeze in supply – perhaps in the lead-up to a Taiwan conflict – strengthens China’s economic deterrence.
No cause for celebration
Following the meeting between Trump and Xi that took place in Korea on 30 October, Beijing announced a one-year pause on the expansion of its export controls on rare earths introduced on 9 October. Chinese negotiators reluctantly confirmed to Brussels negotiators on 31 October that this deal would apply to Europe too. However, this does not solve Europe’s critical raw material conundrum. The 9 October rare earth controls ‘merely’ expanded existing controls which were highly disruptive in and of themselves. After all, the controls of 4 April 2025 on heavy rare earths and permanent magnets, – along with those on (at least) nine other Chinese materials that Beijing introduced between 2023 and 2025 – caused production stoppages throughout 2025.
First, by postponing the 9 October controls Beijing delayed the extraterritorial application of controls on rare earths. It imposed an obligation on exporters anywhere in the world to obtain a Chinese Ministry of Commerce export licence for the transfer of all medium and heavy rare earths (and related components like permanent magnets) between third countries, including to Europe. However, trying to regulate trade between all foreign countries is highly complex. It remains unlikely that Beijing would have been able to enforce – even partially – an extraterritorial scheme at this level of ambition in the short term. With the suspension, China has bought itself a year to build the bureaucratic capacity to enforce these more ambitious export controls. In its own words, Beijing will ‘study and refine specific implementation plans’.
Second, the 9 October controls did cover an even broader range of rare earth mining, refining and recycling technologies. However, Beijing’s efforts to ‘lock in’ its rare earth chokepoints were already well underway. China had introduced many formal and informal limitations on the export of mining, refining and component-making technologies at least by December 2023, and possibly even as far back as the early 2000s.
Third, postponing the 9 October controls delays the formal ban on exports of Chinese rare earths for military end-use. However, de facto such a ban had already been in place ever since the introduction of heavy rare earth controls in April 2025. Even after the 31 October Xi-Trump meeting, early indications are that China still categorically denies licence requests from Europe’s defence manufacturers.
Fourth, the 9 October controls broadened China’s earlier controls to also cover five medium rare earths, namely holmium, erbium, thulium, europium and ytterbium. Yet many key components containing medium rare earths had, in fact, already been restricted by Beijing. After all, these components – such as permanent magnets – often contain heavy rare earths too, which fall under the 4 April controls.
Fifth, the 9 October controls ‘merely’ cover rare earths, but not the nine other critical raw materials that China included in previous regimes. These export control regimes remain firmly in place.
Beijing’s promises remain even vaguer in addressing the root of the problem: the more disruptive controls introduced on 4 April and earlier. During the 31 October EU-China meeting, Chinese representatives offered Brussels ‘general licences’ for European industries. If granted, European industries would no longer have to apply for licences for each individual shipment. Instead, ‘pre-approved buyers’ would receive ‘repeated shipments’. The general licences would ‘probably’ be valid for one year and cover ‘80%’ of European industries, according to insider sources.
Crucial matters remain unresolved: will medical, energy grid, and other critical sectors fall under the remaining 20%? If so, material shortages will likely continue to threaten Europe’s healthcare system, and other essential state functions. The prospects for Europe’s rearmament are even grimmer, as Beijing appears to continue to categorically deny licence requests from Europe’s defence manufacturers. Furthermore export controls offer Beijing continued opportunities for commercial and military intelligence gathering, as the granting of general licenses often entails intrusive information requests.
Even if China does stick to its word initially, Europe has no control over whether the US-China agreement holds. The state of ‘G2’-negotiations between the US and China affect the volumes of CRM supplies to Europe. Spy balloons, the unresolved conflict over the Netherlands-headquartered chip manufacturer Nexperia, tensions around Taiwan, and many other issues could lead to their unravelling.
No return to normal
Beijing is likely to continue to disrupt supply to extract further concessions in the upcoming months and years, while a false sense of security may weaken Europe’s resolve to diversify critical raw material production. Regardless of whether any US-China deal is real (and holds), the EU’s de-risking efforts are moving far too slowly. EU legislation like the Critical Raw Materials Act is ambitious but lacks both budgetary provisions and concrete implementation. Promisingly, the G7 critical minerals roadmap of 31 October (to which Europe has also committed) seeks to ‘eventually eliminate our current dependence on critical minerals supply chains dominated by non-market policies and practices’. The EU’s identification of 60 strategic projects in and beyond Europe is an important step in the right direction.
However, neither the Commission nor the EU Member States have put in place the financial, regulatory, and other means needed to make those projects viable in the face of state-supported production in China. Citing Washington’s stronger support, Solvay, a chemicals group in France, has indicated greater interest in building a new rare-earth processing plant in the US rather than in Europe. If European policymakers and industry once again succumb to a false sense of security, they will make matters even worse.
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