Lessons For India From China's Rare Earth Export Ban

China's dominance in the global supply chain of rare earths is overwhelming. The country accounts for more than 70 per cent of global production and refining capacity. In the current phase of trade wars, China retaliated against the US by imposing restrictions on rare earth exports, citing concerns over national security and the environment.

However, the blanket export ban affects countries other than the US, including India. 

As a result, the Indian carmaking production system has become vulnerable, particularly the EV production. Though India’s auto component industry is calling for a national strategy to secure access to critical materials, it is worth drawing lessons from the experiences of the US and Chinese counterparts.

China's Case In Tackling Trump

The US government started implementing a range of protectionist measures immediately after the 2008 financial crisis. That trend persisted and intensified during the first term of Trump's presidency. 

However, Beijing realised even before Trump 2.0 that the trend will continue. So, Chinese policymakers identified the dire need for a strategic shift and started investing heavily in mineral-rich places in Asia, Africa, Central America, and, to some extent, Latin America. 

This pivot in critical mineral strategy resulted in three key outcomes for China.

First, Chinese firms utilised the lower production costs in these regions — a benefit of relocating their manufacturing bases outside the country. The resultant shift in production, particularly in the Greater Mekong region, Africa, and Central America, churned out a Chinese competitive edge in global markets.

Second, China started bypassing American protectionist barriers, which are supposed to block Chinese exports round-tripped from third countries. In April 2024, for example, the US Trade Representative Katherine Tai alleged that China was sending its steel products to the US via Mexico, circumventing US trade restrictions.

What transpired: US imports from Mexico touched approximately US$ 475 billion in 2023 — about US$ 20 billion more than imports in 2022. At the same time, US imports from China were US$ 427 billion in 2023, down by US$ 10 billion from the previous year's figure.

However, Chinese foreign direct investment (FDI) in Mexico jumped to US$ 3.7 billion in 2023, significantly higher than the decade-long annual average of US$ 1.3 billion.

At least 30 Chinese firms, including major carmakers like BYD and Chery International, now operate in Mexican soil. In a supplementary evidence of this phenomenon, container traffic from China to Mexico surged by 22 per cent in 2024, compared to the previous year.

Third, these Chinese direct investments in Africa and Asia curtailed domestic energy demand by securing access to more affordable foreign energy and mineral resources.

China claims that these local economies also benefited. In Myanmar, China erected six hydroelectric facilities and a thermal power station. Chinese firms also invested in power transmission infrastructure and copper processing infrastructures in Vietnam.

Exports from Vietnam to the US jumped by 40 per cent between 2018 and 2024. And this reflects the underlying trend of Chinese manufacturers shifting their final assembly to third countries and thus bypassing targeted US tariffs.

US Case: Role Reversal

The US is now doing the same with China. American buyers have strategically rerouted shipments via third countries since China’s December 2024 critical mineral exports ban. Most notable are Thailand and Mexico — countries allowing the US continued access to the raw materials, despite Chinese restrictions.

American imports of antimony oxide (a type of rare earth material) from Thailand and Mexico between December 2024 and April 2025 reached approximately 3,834 metric tonnes, surpassing the total imports of the previous three years. This is what the US customs data reveal.

On the other hand, according to Chinese customs data, China's exports of antimony oxide to Mexico and Thailand have increased, making these two countries the top Chinese rare earth export destinations. This is despite neither of the countries featuring among the leading importers of rare earth materials in 2023.

Clearly, once these materials entered Thailand or Mexico, they were re-shipped to potential buyers in the US, whose laws permit the purchase of Chinese-origin minerals routed through third countries, as long as they come from licensed shipments. 

A news report by Reuters traced antimony shipments to Thailand's Unipet Industries (a subsidiary of Chinese Youngsun Chemicals), which exported roughly 3,366 tonnes to US buyers between December 2024 and May 2025.

Interestingly, the shipping documents do not formally disclose origins — a clear pattern reflecting transhipment of products. US buyers are obtaining materials via Chinese agents, who relabel the shipments in a third country as unrelated goods like iron, zinc, or art supplies, and route them onwards to the US.

The Indian Case

The key takeaway for India is that both industry and government must proactively explore alternatives to China. Strategically, it means investing in third countries that maintain cordial relationships with China, to transship products, and investing in the mining sectors of places like Africa and Australia.

Australia is the third-largest producer of rare earth elements (REEs), after China and the US. Africa, too, has significant but underdeveloped rare earth potential. Now, India is eyeing mining opportunities for critical minerals, like lithium, cobalt, and copper, from Australia, Congo, and Zambia. Domestic policies, such as developing rare earth processing facilities and allowing entry into the mining industry, would benefit.

India also needs to partner with countries like Australia and the US for supply diversification and invest in research for rare earth substitutes. Government policies like PLI schemes with a focus on self-reliance, like Atmanirbhar Bharat, should aim to give incentives and build domestic capacity in rare earth mining.

(The writer is a professor at Mahindra University. Views are personal)