China Cracks Down on Rare Earth Smuggling Amid US Trade War

The Ministry of State Security of the People's Republic of China has launched a crackdown on the illicit smuggling of restricted rare earth minerals, alleging that foreign intelligence agencies are colluding with Chinese criminals to steal strategic materials. Authorities reported that smugglers bypassed export controls by mislabeling high-purity minerals, such as dysprosium and terbium, as low-value nickel powder or solder paste, and hiding them inside bottled water, ceramic tiles, and plastic mannequins. These materials were frequently transshipped through Thailand and Mexico to reach the United States.

This enforcement follows a June agreement between Beijing and Washington to facilitate American access to critical materials, though China maintains a 45-day permitting requirement. To strengthen oversight, the government plans to establish a joint enforcement and coordination center for export controls on dual-use items. This follows a broader pattern of resource nationalism, including a 2023 ban on exporting intellectual property related to rare earth extraction.

Simultaneously, the United States is moving to reduce its dependence on China. President Donald Trump signed an executive order in March to establish the U.S. as a leading producer of non-fuel minerals, leading the Department of Defense to invest $400 million in MP Materials. Apple Inc. also agreed to purchase $500 million in magnets from the company to support domestic manufacturing.

Trade negotiations continue ahead of an August 12 deadline for a broader agreement. While the U.S. recently lifted some AI semiconductor restrictions on Nvidia and Advanced Micro Devices, the Chinese Commerce Ministry maintains that Washington must also lift export controls on Huawei Technologies' Ascend chips to restore healthy trade ties.