Trade War Monitor, June 23: China Urged to Streamline Rare Earth Export Rules

Chinese export controls on critical metals, including tungsten and seven rare earth materials, are already severely affecting Japanese manufacturers operating in China, according to Tetsuro Homma, president of the Japanese Chamber of Commerce and Industry in China. This strain is tied to China’s tightening policies, which have made it more difficult for foreign businesses to secure timely and consistent approval for vital material exports, thereby threatening broader global supply chains. Japan's largest business group is advocating for more streamlined export procedures to alleviate disruptions in Japanese production lines and to stabilize the international manufacturing ecosystem. The chamber has directly communicated these concerns to China's Ministry of Commerce, resulting in a limited number of export permit approvals, though further progress is being sought. [para. 1][para. 3][para. 18][para. 19][para. 20][para. 21][para. 22]

In parallel, China’s new energy sector is witnessing positive developments, especially in the export of what are termed the “new three” products: lithium batteries, solar cells, and electric vehicles (EVs). According to customs data released for May, exports of solar cells topped 1 billion units, a 74% increase compared to May 2024. Lithium battery exports reached 390 million (up 23%), and passenger EV shipments numbered 332,000 (up 47%). Pure electric passenger cars made up 60-70% of these exports, with 188,000 units shipped in May, marking an 18% increase year-on-year. In contrast, overall consumer goods exports remained underwhelming, as home appliance exports fell by 6%, and other sectors like clothing and toys showed inconsistent performance. Analysts suggest export growth could pick up in June as U.S. tariffs cool. [para. 2][para. 5][para. 6][para. 7]

To counter U.S. tariffs, Chinese EV manufacturers are increasingly looking to Mexico as an alternative investment and production base. Two unnamed Chinese EV giants are in negotiation to establish factories in Durango, Mexico, possibly through a joint venture, as confirmed by Mexican officials at a trade forum. This reflects a broader trend, with several Chinese carmakers, including BYD, evaluating Mexico as a site for operations to bypass U.S. import restrictions. Jalisco and other Mexican states are actively involved in attracting Chinese automotive investment, which could further shift industry dynamics amid ongoing geopolitical trade tensions. [para. 9][para. 10][para. 11][para. 12][para. 13]

The evolving trade landscape has also prompted broader economic responses. British Columbia, a key province in Canada, is diversifying its trading partners and innovation base to reduce dependence on any single market. Retaliatory Chinese tariffs on seafood and aggressive U.S. tariffs under President Donald Trump have forced the province to re-strategize for greater resilience and economic security. Provincial officials outlined new approaches focusing on nurturing innovation and forging deeper ties with alternative global partners, highlighting the growing complexities and uncertainties in the international trade environment. [para. 23][para. 24][para. 25][para. 26]

Additionally, the U.S. now requires all student visa applicants to undergo rigorous social media screening, with candidates being vetted for signs of hostility toward the country. This move follows concerns over national security and anti-Semitic activity. Chinese authorities have encouraged the U.S. to facilitate Chinese student exchanges, urging President Trump’s statements welcoming Chinese students to be backed by concrete policy actions that protect their rights and interests. [para. 28][para. 29]