Highlights
- China has implemented strict export licensing requirements on seven strategic rare earth elements, causing significant disruption to European industrial sectors.
- European manufacturers, especially in automotive, high-tech electronics, and defense industries, are facing production halts due to limited rare earth element supplies.
- The restrictions have escalated tensions between China and the EU, revealing Europe's strategic vulnerability in critical mineral supply chains.
As Rare Earth Exchanges (REEx) has reported over the past 48 hours, industrial panic is erupting across Europe, India, and beyond. While U.S. media coverage remains subdued, anxiety is rapidly escalating across specific U.S. industrial sectors and among officials in the Trump administration. Now, a central European trade body has gone on the record: China’s April 4 export restrictions on critical rare earth elements (REEs) are throttling supply chains, forcing manufacturers in multiple sectors to halt production. The European Chamber of Commerce in Chin (opens in a new tab)a has convened emergency meetings with Beijing’s Ministry of Commerce in a desperate attempt to contain the fallout.
According to Adam Dunnett (opens in a new tab) via a South China Morning Post (opens in a new tab) interview, the Chamber’s Secretary General, China’s Ministry is overwhelmed by thousands of export license applications. Only a handful have been approved, leaving key sectors—especially automotive, high-tech electronics, and defense-related manufacturing—struggling to move forward. “Some companies have had to stop production,” said Dunnett, who is also vice-chair of the European Business Organisation (opens in a new tab).
The Stance
According to a press release (opens in a new tab) today from Europe’s trade mission in China:
“A lack of fair access to government procurement in China has been a longstanding issue for European companies operating in the country. It has been a key advocacy topic for the European Chamber’s Healthcare Equipment Working Group since the launch of the China Manufacturing 2025 (opens in a new tab) initiative in 2015, which included market share targets for domestic high-end medical devices. In the European Chamber’s Business Confidence Survey 2025 (opens in a new tab), 100 per cent of respondents in the medical devices sector reported missing business opportunities in China in 2024 due to market access and regulatory barriers, with ‘discrimination against foreign-invested enterprises in public procurement’ the top regulatory obstacle faced.
While we urge caution in the application of trade defence tools, the European Chamber supports the end goal of this action, which is to ensure that European companies have the same access to China’s procurement market as Chinese companies enjoy in Europe. The Chamber encourages both parties to work to achieve a negotiated solution, and stands ready to work with interlocutors from both the EU and China to achieve this endeavor.”
Restrictions Announced After Launch of Trump Trade War
The export licensing requirement—covering seven strategic REEs (dysprosium, gadolinium, lutetium, samarium, scandium, terbium, and yttrium) and several rare earth magnets—was introduced just two days after U.S. President Donald Trump announced sweeping reciprocal tariffs. Though intended as retaliation against the U.S., European firms are now caught in the crossfire, and hence the panic and waves of meetings.
Of particular concern is the German automotive sector, where, as REEx reported yesterday, Hildegard Müller, head of the German Association of the Automotive Industry, warned that “production delays and even outages can no longer be ruled out.” Despite a trickle of recent license approvals, the supply remains inadequate for large-scale operations.
Some European applicants report that China’s licensing process is not only slow but also intrusive, requiring them to disclose sensitive intellectual property. Many firms are reluctant to comply, fearing IP leakage, even as production comes to a standstill.
The tension comes just weeks before a high-stakes EU-China summit scheduled for July 24 in Beijing. EU Trade Commissioner Maros Sefcovic (opens in a new tab) met with Chinese Commerce Minister Wang Wentao (opens in a new tab) in Paris this week, discussing “pressing bilateral issues of crucial importance to EU industry,” according to an EU statement. The bloc has issued multiple formal protests (“demarches”) and is pressing for immediate relief.
Troubles in Europe
Jorge Toledo, (opens in a new tab) the EU’s ambassador to China, blasted the controls as a breach of a Geneva agreement reached last month. “It’s not happening,” he said. “China is adding an extremely bad measure to the 1,058 market-access barriers already identified by the EU Chamber,” as reported in the South China Morning Post.
The rare earth squeeze has become a flashpoint in EU-China relations, exposing the strategic vulnerability of Europe’s clean-tech and defense industries. As Washington and Beijing trade geopolitical blows, Europe risks becoming collateral damage.
The day of reckoning is here. The EU’s long-standing dependence on Chinese REE supply—despite years of diversification rhetoric—has now turned into a real-time industrial emergency as REEx has been predicting for months.
Rare Earth Exchanges—launched in January 2025 to educate, guide, and empower retail investors focused on rebuilding American and allied rare earth supply chain resilience—delivers actionable market intelligence, real-time supply chain alerts, and hard-hitting geopolitical risk analysis across the global rare earth and critical minerals sector
This was to be expected. China has been imposing restrictions for weeks.
What is the EU or leading representatives from the usual organizations doing: conferences, roundtables, subsidies for “REE expert training,” endless talks, promoting exploration in European countries where everyone knows that it would take decades to develop a resource and build a production facility.
Now leading business representatives are pointing to the bottleneck, and the first companies are cutting back production.
Instead of industrial companies investing in a company that has been “shovel ready” for years and, with Nolans, owns one of the most interesting resources, but cannot secure financing….