U.S.’ inability to replace rare earths supply from China poses a threat to its defense, warns CSIS
Workers transporting soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China, Oct. 31, 2010.
Stringer | Reuters
As China imposes export controls on rare earth elements, the U.S. would be unable to fill a potential shortfall, according to the Center for Strategic and International Studies — and this could threaten Washington’s military capabilities.
Amid U.S. President Donald Trump’s escalating tariffs on China, Beijing earlier this month imposed export restrictions on seven rare earth elements and magnets used in defense, energy and automotive technologies.
The new restrictions — which encompass the medium and heavy rare earth elements samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium — will require Chinese companies to secure special licenses to export the resources.
Though it remains to be seen exactly how China will implement this policy, the CSIS report, published Monday, warns that it will likely result in a pause in exports as Beijing establishes the licensing system, and cause disruptions in supply to some U.S. firms.
The New York Times reported earlier this week that a pause in China’s rare earth element exports was already occurring.
As China effectively holds a monopoly over the supply of global heavy rare earths processing, such restrictions pose a serious threat to the U.S., particularly its defense technology sector.
“The United States is particularly vulnerable for these supply chains,” CSIS warned, emphasizing that rare earths are crucial for a range of advanced defense technologies and are used in types of fighter jets, submarines, missiles, radar systems and drones.
Along with the export controls, Beijing has placed 16 U.S. entities — all but one in the defense and aerospace industries — on its export control list. Placement on the list prevents companies from receiving “dual-use goods,” including the aforementioned rare earth elements.
Not ready to fill gap
According to CSIS’s report, if China’s trade controls result in a complete shutdown of the medium and heavy rare earth element exports, the U.S. will be incapable of filling the gap.
“There is no heavy rare earths separation happening in the United States at present,” CSIS said, though it noted the development of these capabilities is underway.
For example, the Department of Defense set a goal to develop a complete rare earth element supply chain that can meet all U.S. defense needs by 2027 in its 2024 National Defense Industrial Strategy.
Since 2020, the DOD has committed over $439 million toward building domestic supply chains and heavy rare earths processing facilities, according to data collected by CSIS.
However, CSIS said that by the time these facilities are operational, their output will fall well short of China’s, with the U.S. still far from meeting the DOD’s goal of an independent rare earth element supply.
“Developing mining and processing capabilities requires a long-term effort, meaning the United States will be on the back foot for the foreseeable future,” it added.
U.S. President Trump has also been seeking a deal with Ukraine, which would give it access to its deposits of rare earth minerals. However, questions remain about the value and accessibility of such deposits.
Implications
The CSIS report warns that the export controls pose direct threats to U.S. military readiness, highlighting that the country is already lagging behind in its defense manufacturing.
“Even before the latest restrictions, the U.S. defense industrial base struggled with limited capacity and lacked the ability to scale up production to meet defense technology demands,” its authors said.
They cite an estimate that China is acquiring advanced weapons systems and equipment five to six times faster than the U.S., originating from a U.S. Air Force official in 2022.
“Further bans on critical minerals inputs will only widen the gap, enabling China to strengthen its military capabilities more quickly than the United States,” the report concludes.
The U.S. is not alone in its concerns about China’s monopoly on rare earths, with countries like Australia and Brazil also investing in strengthening domestic rare earth elements supply chains.
CSIS recommends that the U.S. provide financial and diplomatic support to ensure the success of these initiatives.
However, China’s new export licensing system for the rare earths could also incentivize countries across the world to cooperate with China to prevent disruptions to their own supply of the elements, CSIS said.
A research report from Neil Shearing, group chief economist at Capital Economics, on Monday also noted how controls on rare earths and critical minerals have become part of Beijing’s playbook in pushing back against Washington.
Shearing notes that in addition to China’s hold on some rare earths, the supply of many other critical minerals, including cobalt and palladium, is concentrated in countries that align with Beijing.
“The weaponising of this control over critical minerals — and the race by other countries to secure alternative supplies — will be a central feature of a fractured global economy,” he said.
Nvidia CEO Jensen Huang delivers the keynote address during the Nvidia GTC 2025 at SAP Center on March 18, 2025 in San Jose, California.
Justin Sullivan | Getty Images
Nvidia said on Tuesday that it will take a quarterly charge of about $5.5 billion tied to exporting H20 graphics processing units to China and other destinations. The stock slid more than 6% in extended trading.
On April 9, the U.S. government told Nvidia it would require a license to export the chips to China and a handful of other countries, the company said in a filing.
The disclosure is the strongest sign so far that Nvidia’s historic growth could be slowed by increased export restrictions on its chips, which the U.S. government says can be used to create supercomputers for military uses. Nvidia reports fiscal first-quarter results on May 28.
During President Biden’s administration, the U.S. restricted AI chip exports in 2022 and then updated the rules the following year to prevent the sale of more advanced AI processors. The H20 is an AI chip for China that was designed to comply with U.S. export restrictions. It generated an estimated $12 billion to $15 billion in revenue in 2024.
Nvidia CEO Jensen Huang said on the company’s last quarterly earnings call in February that revenue from China had dropped to half of pre-export control levels. Huang warned that competition in China is growing, and for the second straight year, Nvidia listed Huawei as a competitor in its annual filing.
China is Nvidia’s fourth-largest region by sales, after the U.S., Singapore, and Taiwan, according to the company’s annual report. More than half of its sales went to U.S. companies in its fiscal year that ended in January.
Nvidia’s H20 chip is comparable to the H100 and H200 AI chips used in the U.S. and other countries, but it has slower interconnection speeds and bandwidth. It’s based on a previous generation of AI architecture called Hopper introduced in 2022. Nvidia is now focusing on selling its current generation of AI chips, called Blackwell.
DeepSeek, the Chinese company whose competitive AI model R1 unveiled earlier this year upended markets, used H20 chips in its research.
In addition to the existing Chinese export controls, Nvidia also faces new restrictions on what it can export starting next month, under “AI diffusion rules” first proposed by the Biden administration.
Nvidia has argued that further controls on its chips would stifle competition and potentially even erode U.S. competitiveness in technology. The company previously said it moved some of its operations, including testing and distribution, out of China after the 2022 export controls.
At the company’s annual conference last month, when asked about Chinese export controls, Huang said Nvidia works to comply with the law, but he also noted that about half of the world’s AI researchers are from China, and many of those work at U.S.-based AI labs.
Nvidia said in Tuesday’s filing that the U.S. government told the company on Monday that the license requirement for H20 chips would be in effect “for the indefinite future.”
Nvidia shares have dropped 16% this year, largely due to President Trump’s announcement of widespread tariffs on top trading partners. While exemptions have been made on various electronics products, including smartphones, computers and semiconductors, Trump and some officials said over the weekend that the reprieve was temporary and part of plans to apply separate tariffs to the sector.
Shares of Advanced Micro Devices dropped more than 7% in after-hours trading on Tuesday following Nvidia’s disclosure. AI chipmaker Broadcom fell almost 4%.
WATCH: Nvidia says U.S. requires license to export H20 products to China
Dylan Field, co-founder and CEO of Figma Inc., after the morning sessions at the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on July 11, 2024.
Bloomberg | Bloomberg | Getty Images
Design software maker Figma said on Tuesday that it has submitted paperwork to the U.S. Securities and Exchange Commission for an initial public offering.
The confidential filing lands 16 months after the company scrapped a deal to be acquired by Adobe for $20 billion due to regulatory pressure in the U.K. The San Francisco startup had originally agreed to the deal 2022. Adobe paid Figma a $1 billion termination fee.
Figma’s software is popular among designers inside companies who need to collaborate on prototypes for websites and apps. The company was valued at $12.5 billion in a 2024 tender offer.
“There are two paths that venture-funded startups go down,” Dylan Field, Figma’s co-founder and CEO, said in an interview with The Verge last year. “You either get acquired or you go public. And we explored thoroughly the acquisition route.”
The announcement lands at a precarious moment for the tech IPO market, which has been largely dormant since late 2021. The Trump presidency was expected to revive new offerings due to promises of less burdensome regulations.
But after filing their prospectuses with the SEC, fintech company Klarna and online ticket marketplace StubHub delayed their IPOs earlier this month following the market turmoil caused by Trump’s announcements on widespread tariffs. Digital banking service Chime, which had filed confidentially with the SEC, also postponed its planned offering.
Turo, a car-sharing service, withdrew its IPO prospectus in February, three years after filing its initial prospectus.
Figma was founded in 2012 and is backed by investors including Andreessen Horowitz, Durable Capital, Greylock Partners, Index Ventures, Kleiner Perkins and Sequoia Capital. The company, which ranked 26th on CNBC’s Disruptor 50 list in 2024, had about $600 million in annual revenue as of early last year.
— CNBC’s Ari Levy contributed to this report.
Technology
Meta CEO Mark Zuckerberg considered spinning off Instagram from Facebook in 2018: FTC trial
Thilina Kaluthotage | Nurphoto | Getty Images
Meta CEO Mark Zuckerberg considered spinning out Instagram in 2018 on concerns about the rising threat of antitrust litigation against Facebook, according to an email presented Tuesday in a Washington, D.C. courtroom.
During Zuckerberg’s second day of testimony in Meta’s antitrust trial with the Federal Trade Commission, lawyers representing the FTC introduced an email from May 2018, in which Zuckerberg appeared to comment on the possibility of separating the photo-sharing app his company purchased in 2012 for $1 billion.
“And i’m beginning to wonder whether spinning Instagram out is the the only structure that will accomplish a number of important goals,” Zuckerberg wrote in the email. “As calls to break up the big tech companies grow, there is a non-trivial chance that we will be forced to spin out Instagram and perhaps WhatsApp in the next 5-10 years anyway. This is one more factor we should consider.”
Facebook bought Instagram in 2012, when the photo app had 13 employees and Zuckerberg was poised to take his company public in what, at the time, was the largest tech IPO on record. The purchase of Instagram and 2014 acquisition of WhatsApp for $19 billion are at the heart of the blockbuster antitrust trial that kicked off Monday and could last weeks.
The FTC alleges that Meta monopolizes the social networking market, and has argued that the company shouldn’t have been able to complete those acquisitions. The agency is seeking to cleave the apps from Meta as a possible remedy.
Meta disputes the FTC’s allegations and claims the regulator mischaracterizes the competitive landscape and fails to acknowledge a number of rivals like TikTok and Apple’s iMessage, and not merely other apps like Snapchat. Earlier in the trial, the FTC also presented an Oct. 2013 email in which Zuckerberg told other Facebook executives that Snap CEO Evan Spiegel rebuffed his $6 billion offer to buy Snapchat.
Zuckerberg also said in the 2018 email that the company’s “best estimates are that, had Instagram remained independent, it would likely be around the size of Twitter or Snapchat with 300-400 million MAP today, rather than closer to 1 billion.” MAP is short for monthly active people.
WATCH: Mark Zuckerberg takes witness stand on first day of antitrust trial.
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