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Trade War 2.0: The Battle for Critical Minerals
As tensions rise between global powers, the EU and U.S. move to secure critical minerals for defence, new technologies and green transition, challenging China’s dominance in the sector. The new Critical Minerals Agreement could reshape transatlantic trade, while Beijing tightens control over exports—turning raw materials into the latest weapon in an escalating economic and geopolitical confrontation.
The EU and U.S. launched negotiations for a Critical Minerals Agreement (CMA) in 2024, aiming to secure essential raw materials for clean technologies and align EU supply chains with U.S. tax credit rules under the Inflation Reduction Act. But since then, the global landscape has shifted: China has imposed new export controls on rare earths, escalating a trade war that now centers on critical resources. As tensions grow, the EU and U.S. must rethink their strategy. What began as a regulatory workaround has become a geopolitical necessity—reshaping how the West competes with China in the race for industrial resilience.
By Paolo Licandro
Brussels, 28 April 2025 - 3 MINUTES READ
Brussels, 28 April 2025 - 3 MINUTES READ
In response to increased U.S. tariffs, China imposed export controls on seven rare earth elements, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These elements are crucial for various industries, including defense, electronics, and renewable energy. China's dominance in the rare earth market—accounting for approximately 90% of global processing—gives it significant leverage. The export restrictions are not limited to the U.S.; they affect global markets, prompting concerns over supply chain vulnerabilities.
There are various types of export restrictions: non-automatic licensing, tariffs, quotas, outright bans.
The new China's restrictions are not a ban; rather, they require firms to apply for a license to export rare earths. These restrictions are undoubtedly affecting trade with the United States the most. However, these restrictions could also impact a political initiative that began under the Biden administration and included EU participation.
Previously, in 2023, the Council authorized the Commission to open negotiations with the United States on a Critical Minerals Agreement (CMA) and the related negotiating directives. This agreement seeks to strengthen critical minerals supply chains and mitigate some of the negative repercussions of the U.S. Inflation Reduction Act (IRA) on EU industry.
The proposed CMA aims to:
There are various types of export restrictions: non-automatic licensing, tariffs, quotas, outright bans.
The new China's restrictions are not a ban; rather, they require firms to apply for a license to export rare earths. These restrictions are undoubtedly affecting trade with the United States the most. However, these restrictions could also impact a political initiative that began under the Biden administration and included EU participation.
Previously, in 2023, the Council authorized the Commission to open negotiations with the United States on a Critical Minerals Agreement (CMA) and the related negotiating directives. This agreement seeks to strengthen critical minerals supply chains and mitigate some of the negative repercussions of the U.S. Inflation Reduction Act (IRA) on EU industry.
The proposed CMA aims to:
- Enhance Supply Chain Resilience: By diversifying sources of critical minerals, the agreement aims to....
