China Hits US Rare Earths Companies with Export Curbs

China has imposed targeted export controls on two heavily state-backed US rare earths companies and barred 46 American defense contractors from government procurement.

The Chinese Ministry of Commerce announced on Monday (June 22) that it has added 10 US industrial suppliers to its export control list to “safeguard national security and interests.”

The move is seen as a retaliation to Washington’s blacklisting of major Chinese technology firms.

China’s clampdown targets the anchor of America’s critical minerals supply chain, MP Materials (NYSE:MP), and emerging rare earths producer USA Rare Earth (NASDAQ:USAR).

Also designated were drone manufacturers Teal Drones and Jaia Robotics, the aerospace subsidiary of BAE Systems (LSE:BA,OTCPL:BAESY), electronics manufacturer Aveox and military equipment provider Oshkosh Defense.

Concurrently, the Chinese Ministry of Finance excluded 46 US companies from participating in domestic government procurement projects, though foreign-funded, locally registered entities associated with the firms are exempt.

The coordinated measures from China end a diplomatic lull that came after last October’s summit between US President Donald Trump and Chinese President Xi Jinping. China’s commerce ministry has explicitly framed the fresh sanctions as a response to the Pentagon’s recent update to its “1260H” list.

Earlier this month, the US Department of Defense added Chinese corporate giants Alibaba Group Holding (NYSE:BABA), Baidu (NASDAQ:BIDU) and automaker BYD (OTCPL:BYDDF) to a roster of entities it accuses of aiding Beijing’s military.

The US designation bars the Pentagon from awarding direct contracts to those companies starting on June 30, with indirect procurement restrictions following in 2027.

MP Materials, which operates the only major US rare earths mine, recently received a US$400 million equity investment from the Department of Defense. Meanwhile, USA Rare Earth secured US$1.6 billion in funding from the Department of Commerce and recently agreed to purchase Brazil’s Serra Verde Group to gain access to Latin American mines.

Both companies said they have already largely phased out Chinese equipment and materials. Shares of MP Materials gained as much as 3.7 percent in New York trading after the announcement, while USA Rare Earth rose 5.8 percent.

China currently accounts for 60 percent of global mined rare earths, 90 percent of refining capacity and 95 percent of permanent magnet production, according to the International Energy Agency.

The Chinese sanctions follow closely on the heels of a Group of Seven pledge to cap rare earths and permanent magnet imports from any single country to below 60 percent by 2030.

Beijing has similarly started to leverage its own industrial dominance.

Three weeks ago, researchers at the Chinese Academy of Sciences published a comprehensive framework identifying 63 specific technology sectors where China holds a global advantage, outlining them as candidates for future…