China’s recent export restrictions on critical minerals like gallium, germanium, and a wider basket of rare earth alloys and magnets are once again placing its strategic resource dominance under global scrutiny. These materials are the bedrock of modern technology, powering everything from semiconductors and electric vehicle batteries to guided missiles and advanced communication systems. And Beijing knows it.

This latest move, widely seen as a response to escalating U.S. semiconductor sanctions, has reignited fears that China is prepared to weaponize its control over critical mineral supply chains.

It is a playbook the world has seen before, most notably when China curbed rare earth exports over a decade ago during a diplomatic dispute with Japan. The broader message today is unmistakable – China is flexing its geopolitical muscle using what it controls best, resources that the world desperately needs.

The Immediate Fallout – Panic in Boardrooms and Diplomatic Circles
Global reaction has been swift and concerned. On Tuesday, major automakers from Germany joined a growing chorus of international companies, including those from the U.S., Japan, and India, warning that China’s restrictions could soon trigger production delays and even full-scale shutdowns if alternatives aren’t secured urgently.

For German carmakers, who rely heavily on a stable flow of rare earth magnets and alloys for their EV and hybrid vehicle production, the disruption has sparked real alarm.

Hildegard Mueller, the head of Germany’s powerful auto industry lobby, told it straight and firmly, “If the situation is not changed quickly, production delays and even production outages can no longer be ruled out.”

Her concern mirrors that of a leading Indian EV manufacturer, which last week flagged similar threats to its production timeline. Aerospace and defense contractors, semiconductor companies, and robotics manufacturers are all bracing for similar ripple effects as shipments remain stalled at Chinese ports, entangled in lengthy and opaque licensing processes.

A Diplomatic Blitz Is Underway
With critical supplies frozen in transit, countries are scrambling. Diplomats from India, Japan, and across Europe are urgently requesting high-level meetings with Chinese officials, hoping to expedite export approvals. A Japanese business delegation is expected to land in Beijing in early June, while several European countries with large auto sectors have requested “emergency” talks with China’s Ministry of Commerce in recent weeks.

The White House, too, has taken notice. Spokeswoman Karoline Leavitt confirmed on Tuesday that U.S. President Donald Trump and Chinese President Xi Jinping are expected to discuss the export curbs this week. “Our administration officials continue to be engaged in correspondence with their Chinese counterparts,” Leavitt said, adding that the White House is actively monitoring China’s compliance with the Geneva trade agreement.

Trump, who during his first term imposed aggressive tariffs on Chinese imports with some reaching as high as 145%, has long sought to reduce the U.S.’s economic dependence on China. But the Chinese response has been equally forceful. By leveraging its dominance in minerals essential to modern manufacturing and defense, China is signaling it will not retreat easily.

Weaponizing Supply Chains, A Two-Way Street
The unfolding situation is a classic case of economic weapons being drawn on both sides of the geopolitical chessboard. Even as the U.S. attempts to stifle China’s access to advanced chips and technology, China is responding by tightening the screws on the materials needed to make them. The result is a spiraling escalation that risks reshaping not just bilateral trade, but the very architecture of global supply chains.

Frank Fannon, a former U.S. Assistant Secretary of State for Energy Resources and now a minerals consultant, views this moment as predictable yet urgent.

“I don’t think anyone should be surprised how this is playing out,” he said. “We have a production challenge [in the U.S.] and we need to leverage our whole-of-government approach to secure resources and ramp up domestic capability. The time horizon to do this was yesterday.”

Carmakers Caught In High Cross Winds

As mentioned before, global carmakers are raising red flags over what could soon become a full-blown production crisis: a severe shortage of rare-earth magnets from China. These magnets – vital for essential auto components like power steering motors, anti-lock braking sensors, alternators, cameras, and even windshield wipers – are at the heart of modern vehicle systems. With China tightening its grip on exports, auto executives warn that assembly lines could grind to a halt in a matter of weeks.

In a previously undisclosed letter dated May 9, top U.S. trade officials were briefed on the urgency of the matter by the heads of two influential industry groups – the Alliance for Automotive Innovation (representing heavyweights like GM, Toyota, Volkswagen, and Hyundai) and MEMA, The Vehicle Suppliers Association.

The tone of the letter was urgent: without consistent and reliable access to rare-earth elements and magnets, automotive suppliers cannot deliver critical parts, and the entire vehicle production cycle is at risk.

“In severe cases,” the groups cautioned, “this could include the need for reduced production volumes or even a shutdown of vehicle assembly lines.” That’s not an empty warning, it’s a scenario the industry is now actively bracing for.

Alliance CEO John Bozzella and MEMA CEO Bill Long confirmed that while the issue remains unresolved, they are encouraged by the administration’s ongoing high-level engagement. The Biden administration, too, is reportedly keeping this matter front and center. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer discussed it during trade talks with Chinese officials in Geneva earlier this month.

However, progress has been slow. Greer noted in an interview that China had agreed in principle to ease export restrictions, but implementation has lagged. 

The backdrop to this drama (China’s near-total control over global rare-earth processing, holding over 90% of the market) in early April, Beijing mandated that any rare-earth magnet exports must now pass through a new licensing regime. Companies report that the application process is opaque, bureaucratic, and often requires voluminous documentation. As a result, exports in April dropped by half compared to the previous month.

Meanwhile, in a strongly worded post on Truth Social, President Donald Trump accused China of reneging on a recent agreement aimed at easing tensions.

“China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,” he wrote. In response, China’s embassy in Washington pushed back, arguing it was the U.S. that continues to misuse export controls in the semiconductor sector another flashpoint in the broader trade standoff.

A U.S. official involved in the Geneva talks clarified that while tariffs and Chinese non-tariff measures were on the agenda, U.S. semiconductor export controls were not part of the deal. What’s frustrating for Washington, the official added, is Beijing’s foot-dragging on export license approvals. Should China continue to stall, the U.S. may retaliate by tightening its own trade restrictions, a move that would further escalate tensions.

On the ground, the impacts are already trickling in; while some suppliers  –  notably to Volkswagen – have received licenses, many others, including Indian automakers, report that they have yet to receive any approvals and may be forced to halt production by early June. German auto parts giant Bosch also flagged delays. A company spokesperson described the licensing process as “complex and time-consuming,” largely due to the exhaustive documentation requirements.

India’s Auto Sector, EV Hopes Stall 

India’s electric vehicle ambitions and broader auto manufacturing sector are also facing Chinese headwinds – despite nine Indian auto component makers receiving embassy-level endorsements from China, not a single shipment has resumed. The magnets – vital for everything from drive trains to EV motors – remain stuck behind Beijing’s new export licensing wall.

The Ministry of Commerce in China, which must give final approval after exporters secure end-user certificates (EUCs), has yet to greenlight any dispatches to India, leaving manufacturers and policymakers scrambling. Indian diplomats are reportedly trying to secure bilateral meetings with Chinese counterparts, even as tensions between the two nations add another layer of complexity to the gridlock.

Hence, industry officials have made it clear: production shutdowns are no longer a distant threat.

“You can’t roll out a vehicle if even one component powered by a rare-earth magnet is missing,” said an auto executive. And while the ₹306 crore worth of rare-earth magnet imports in FY25 may seem modest, their strategic role is anything but.

The Society of Indian Automobile Manufacturers (SIAM) warned last week that without immediate relief, production lines could stall within weeks. The crisis is not limited to EVs, these magnets are critical for various automotive systems, including power steering, gearboxes, and sensors.

Not Just Auto Sector
The ripple effect extends well beyond the automotive industry – from aerospace to clean energy and consumer electronics, sectors relying on electric circuitry and advanced motion systems are facing growing uncertainty.

Of the 17 Indian firms that submitted EUC applications, nine – including major players like Continental Automotive, Hitachi Astemo, Mahle Electric Drives, Varroc Engineering, and Flash Electronicsm have received embassy-level approval. However, the Chinese commerce ministry’s final sign-off remains elusive. Applications from companies such as Minda Instruments and Nippon Audiotronix are still stuck in the pipeline.

Global Supply Shock and U.S. Moves
China’s April 4 notification effectively tightened its grip on global rare-earth flows. By mandating export licenses for materials like dysprosium, terbium, and samarium, Beijing has put the world on notice. 

Amid the standstill, the U.S. is eyeing emergency powers. President Donald Trump is poised to invoke the Defense Production Act, waiving legal barriers to speed up domestic production of critical minerals.

The move, echoing pandemic-era policies used by Joe Biden, would let the White House bypass Congressional funding hurdles and accelerate projects over $50 million, a bold attempt to wrest control back from China’s supply-chain dominance.

But as George Washington University’s Prof. John Paul Helveston warns, “That’s a long-term play. In the short run, the U.S. and others will have to keep negotiating with China.” For India too, the road to supply independence is a marathon, not a sprint. Until then, the country’s EV dreams may remain parked in neutral

Beijing’s Economic Muscle as Diplomatic Stick
Export curbs have long been a tool of statecraft. Governments claim they are about national security, environmental protection, or boosting domestic industries but strip the layers, and one finds another motive – geopolitical leverage.

During COVID-19, nations hoarded vaccines. During the Ukraine war, Russia used its stranglehold on gas and grain. China, too, is weaponising its dominance over critical raw materials. The December 2024 export ban on the US, particularly gallium, germanium, antimony, and graphite, all essential for semiconductors and armament was a geopolitical tool and the world is starting to realise it.

Between 2009 and 2020, the number of global restrictions on critical raw materials surged more than fivefold to 13,102. An average of over 110 new export restrictions were introduced each year from 2021 to 2023. But none sting like China’s, simply because no one else holds the kind of production monopoly it does, 60% of germanium, 80% of gallium, and nearly all of the world’s rare earth processing.

Still, this isn’t the first time China has squeezed global supply. Back in 2006 and 2010, it clamped down on rare earth exports, triggering panic across the West. The WTO intervened, China withdrew the curbs but the message had landed – diversify or suffer.

Since then, global rare earth output has quadrupled, from 75.7 kilotons in 1995 to over 350 kilotons in 2023. And prices reflect the chokehold: gallium’s per kilogram price has surged 212% since 2020.

But China has also adapted to being shut out. Huawei’s homegrown chips and operating system, HarmonyOS NEXT, are a direct result of Western sanctions – so one door shut, China codes another.

The Last Bit, Where Does This Leave India?
India is walking a tightrope, caught in the crosswinds of a US-China showdown, with its own bilateral tensions with Beijing and limited domestic rare earth reserves, it must act swiftly.

The current pause in magnet shipments is more than a trade hiccup and more of a s a warning. If rare earth supply chains remain dependent on one unpredictable power, then “Make in India” will always remain a slogan vulnerable to sabotage.

Hence, India must accelerate mining at home, forge alliances with alternative suppliers like Australia and Africa, and aggressively invest in processing technologies since, strategic stockpiles are not just a defence issue anymore, they are economic lifelines.

In the meantime, while companies around the world scramble to reroute supply chains, boost domestic capabilities, or seek alternative sources (which are often limited and costly), this is not mere trade dispute but a fundamental realignment of how the world accesses and controls strategic resources.

Export controls, once seen as rare and drastic, are quickly becoming normalized tools of geopolitical leverage. The implications are deep – what happens when minerals become bargaining chips? What’s the cost of uncertainty for global industries that rely on just-in-time logistics and globalized production?

If cooler heads do not prevail or if solutions and diversification don’t arrive fast enough, the world may be entering an era where trade, once a driver of cooperation, becomes a tool of coercion.

And in this new era, the nations that sit on the supply or control the chokepoints will shape the rules of the global economy. The world’s next war may not be fought over oil, but over terbium, gallium, and dysprosium. And right now, China is stockpiling the ammunition.