Export restrictions have already begun to affect U.S. and EU, with automotive part manufacturers making hard decisions to halt production.

In April 2025, China imposed sweeping restrictions on the export of rare earth minerals and magnets, targeting sectors critical to Western economies in retaliation for renewed U.S. tariffs. Although some tariffs were later paused, China's restrictions have remained firmly in place, and the effects are being felt by automotive manufacturers who are particularly vulnerable.

Exporters now require licenses, of which only about 25% have been granted, according to The Nikkei, the world's largest financial newspaper. This licensing bottleneck has not only slowed global access to key materials but has also disrupted production within China itself, where magnet manufacturers have paused operations while waiting for policy clarity.

These restrictions hit at the heart of advanced manufacturing and defense, as China controls over 90% of the global rare earth supply chain – what began as a geopolitical tit-for-tat now appears to be a tangible economic disruption.

Western automakers in the U.S. and EU are among the first to feel the pinch, with Ford Motor Company temporarily closing its Explorer SUV production line in Chicago due to shortages of high-performance magnets essential to electric motors and hybrid systems.

U.S. automakers have also issued warnings that broader production cuts could begin within weeks if material shortages continue.

Meanwhile, in Europe, multiple car part manufacturers have halted lines, according to CLEPA (the European Association of Automotive Suppliers). These components include magnets for EV motors, seats, and catalytic converters, all deeply integrated into vehicle systems.

"With a deeply intertwined global supply chain, China's export restrictions are already shutting down production in Europe's supplier sector," said Benjamin Krieger, secretary general of CLEPA, in a statement. "We urgently call on both the EU and Chinese authorities to engage in a constructive dialogue to ensure the licensing process is transparent, proportionate, and aligned with international norms."

Shortages threaten national security

Beyond the automotive sector, the rare earth shortage poses an even graver risk to national defense.

With supply chains tightening around heavy rare earths like dysprosium and terbium – vital for the permanent magnets used in missile guidance systems, radar, and other advanced military technologies – U.S. manufacturers are sounding the alarm that, without swift action, the broader defense base could be seriously compromised.

As NioCorp CEO Mark Smith put it, "This is a true crisis for our economy and our national defense."

With China holding a near-monopoly on refined heavy rare earths, its policy decisions now have the potential to paralyze not only commercial manufacturing but also critical defense readiness.

Recently, the U.S. Department of Commerce (DOC) determined that Chinese producers of graphite-based anodes have been benefiting from unfair government subsidies, leading to artificially low pricing – a practice known as dumping.

In response, DOC proposes imposing tariffs as high as 721% on a broad range of graphite anode materials used in lithium-ion batteries.

The decision was welcomed by U.S. producers such as Westwater Resources, which is developing the Kellyton Graphite Processing Plant and Coosa Graphite Deposit in Alabama.

Westwater anticipates that the tariffs will encourage automakers and battery manufacturers to secure domestic supply agreements, thereby accelerating investment and strengthening the U.S. battery supply chain.

American industries recalibrate operations

Further underscoring the urgency, MP Materials, the operator of the only active rare earth mine in the U.S., has halted shipments to China for processing and is now accelerating plans to manage materials domestically.

dörkdesign

With China holding a near-monopoly on multiple critical minerals, its policy decisions have the potential to paralyze commercial manufacturing and defense readiness.

While the company is expanding its capabilities in California and Texas, its previous reliance on China's processing capacity highlights how vulnerable Western companies remain. Simultaneously, companies like Volvo and Polestar have scaled back some EV-related programs, citing rare earth and battery material shortages.

These changes are not just temporary disruptions – they represent an inflection point in Western industrial planning, pushing companies to rethink sourcing, investment, and geopolitics.

Among the few near-term responses emerging is NioCorp's Elk Creek Critical Minerals Project in Nebraska. Fully permitted and shovel-ready, the project is positioned to produce niobium, scandium, titanium, and potentially heavy rare earth oxides domestically.

With project financing pending, NioCorp claims construction could begin immediately, with a three-year timeline to first production.

The company has framed the project as not just an economic opportunity, but a strategic imperative: a way to replace dependence on Chinese materials with a "Made-in-America" alternative. In the context of national supply chain insecurity, projects like Elk Creek are gaining attention and urgency.

A critical minerals cold war

The growing crisis illustrates that critical mineral supply chains are no longer just economic infrastructure – they have the potential to become geopolitical weapons, and China's restrictions reveal how dominance over raw materials can be used to exert strategic influence far beyond its borders.

The U.S. and the EU are now scrambling to coordinate responses, from emergency subsidies and stockpiling to new diplomatic outreach, in an effort to stabilize trade. Industry leaders and policymakers alike now recognize that this is not just about tariffs or technology – it is a scramble for materials that power the modern economy.

The race is on to build a parallel, China-independent supply chain before the next disruption comes.

"Given that China is the sole source of 100% of processed heavy rare earths, President Xi holds all of the cards on this," said NioCorp CEO Smith. "Fortunately, NioCorp's Elk Creek Critical Minerals Project is fully permitted to start construction, which can begin immediately once project financing is finalized. The sooner we can start our three-year construction period, the sooner we can be in production of Made-in-America niobium, scandium, and titanium and potentially heavy rare earth oxides. But we need to move quickly so that U.S. manufacturing and our defense industrial base can start to see light at the end of this tunnel."