China targets U.S. rare earth firms in export retaliation

China widened its trade fight with Washington by putting MP Materials and USA Rare Earth on its export control list, a move that cut off Chinese dual-use exports to the two companies and eight other U.S. entities. Beijing framed the step as retaliation for recent U.S. restrictions on several Chinese firms and said the targeted companies were linked to the U.S. military.

The strike landed at the most vulnerable point in the U.S. industrial strategy: rare earth magnets. Those components sit inside vehicles, electronics, power generation equipment, medical imaging systems, satellites, guidance systems, aircraft structures and smart missiles. China mines about 60 percent of the world’s rare earths, processes and separates about 90 percent, and manufactures about 94 percent of rare-earth-based products, giving Beijing leverage over a supply chain that members of Congress say is still overwhelmingly dependent on China.

The pressure campaign carried real economic consequences long before June 22. China’s April 2025 export restrictions on heavy rare earths and permanent magnets triggered rapid disruptions across allied defense, automotive and industrial supply chains, according to a CSIS brief. In response, the Trump administration has leaned into a reshoring push that has included billions in financing, price floors of $110 per kilogram, guaranteed government offtake, Project Vault and new bilateral frameworks with Australia, Japan, Malaysia and Saudi Arabia.

Congress moved again on June 9, when Chairman John Moolenaar and Ranking Member Ro Khanna introduced the Magnets Value Chain Support Act of 2026. The bill would create tax credits ranging from $5 per kilogram for rare earth oxide production to $33 to $40 per kilogram for Tier 2 defense-grade magnet manufacturing, plus a 15 percent domestic magnet input usage credit for U.S. motor manufacturers. Backers cast the measure as a direct attempt to reshore the chain from oxide production through final magnet assembly.

The companies now under pressure have already started to adapt. MP Materials said in April 2025 that it had stopped shipping rare earth concentrate to China, calling sales under 125 percent tariffs commercially irrational, and said it had invested nearly $1 billion to rebuild the full rare earth supply chain in the United States. USA Rare Earth said on June 3, 2026, that it finalized definitive agreements with the Commerce Department, unlocking access to up to $1.6 billion in CHIPS Program funding, including up to $277 million in federal funding and up to $1.3 billion in senior secured loan capacity. Whether those plans can move fast enough now looks like the central question: China is squeezing the exact bottleneck Washington is trying to unwind.