Why the Next Critical Mineral Deadline Could Trigger Major Component Shortages

Article Highlights:

• Agreed to on October 30, 2025 in Busan, South Korea, the US-China trade truce covers a range of trade issues.

• At least 22 minerals and materials had export restrictions—or licensing requirements—placed on them by China prior to the trade agreement.

• If the 60-day reprieve is just that, and the trade deal is not expanded or extended into something more lasting, there will likely be swift and severe supply chain shortages of products that contain even trace amounts of the restricted critical minerals. The International Energy Agency estimates that up to $6.5 trillion per year of downstream production outside China could be at risk if China’s export controls are fully implemented.

Prior to a crucial September meeting between U.S. President Trump and Chinese President Xi Jinping, a key agreement between the U.S. and China regarding critical minerals, sanctions, and tariffs was set to expire on November 10. Immediately prior to the meeting, though, Treasury Secretary Scott Bessent announced that the so-called Busan Agreement would be extended by 60 days, establishing a new deadline of January 10.

While this truce is technically only between the U.S. and China, and mainly addresses bilateral issues, the critical mineral ramifications of the deal could impact the entire planet. This is because one of the suspended regulations on the Chinese side restricts exports of critical minerals and their derivative products to all countries, rather than just the U.S. Coupled with an extremely low in-scope threshold for goods requiring export licenses (if 0.1% of the value of the exported good is a restricted mineral, it requires an export license) means that, if fully enforced, these regulations have the power to cripple global supply chains.

What’s in the Trade Deal?

Agreed to on October 30, 2025, in Busan, South Korea, the US-China trade truce covers a range of trade issues. Among other smaller details, here are some key points agreed to by each side—which are now set to expire on January 10, 2027:

U.S. Agreements

Set against the backdrop of U.S. President Donald Trump’s so-called “Trade War” with China and “Liberation Day” tariffs instituted at the beginning of his term, China prioritized a reduction and stabilization in the tariffs applied to its goods entering the U.S. market. However, one often overlooked and critical concession made by Washington was the suspension of the BIS Entity List 50% Affiliates Rule, which was wreaking havoc on Chinese company Nexperia at the time of the suspension. The rule, which had been in discussion for over a year, was unexpectedly suspended. If reinstituted, listed Chinese companies and their affiliates would once again be exposed to significant restrictions.

Chinese Agreements

In retaliation to U.S. tariffs on goods coming from China, the Chinese government developed a comprehensive retaliatory program to restrict exports of critical minerals that it dominates the mining and refining of. While China did offer concessions on domestic tariffs for imports of U.S. goods, China does not import nearly as many products from the U.S. The key point here is China’s suspension of major export license requirements that were expanded just before the truce and set to take effect just after the truce was agreed to. These new restrictions, if fully implemented, would have imposed major difficulties on any supply chain involving critical minerals or rare earth elements globally.

Which Minerals are Restricted?

At least 22 minerals and materials had export restrictions—or licensing requirements—placed on them by China. Below is a table outlining the minerals, when they were restricted, and the current status of the export license requirements in China:

What If the Trade Deal Does Not Extend Beyond January?

If the 60-day reprieve is just that, and the trade deal is not expanded or extended into something more lasting, there will likely be swift and severe supply chain shortages of products that contain even trace amounts of the restricted critical minerals.

The International Energy Agency estimates that up to $6.5 trillion per year of downstream production outside China could be at risk if China’s export controls are fully implemented. Since the inception of the Chinese export restrictions, the major loophole (likely by design) was that while large sums of the restricted minerals could not be directly exported, components containing the restricted minerals could be. This meant that companies could simply utilize Chinese manufacturers for their components, and still have access to the finished goods used in their products. If the agreement expires, however, this major loophole will close. Consequently, companies would become reliant on the Chinese export license process, which has not necessarily been a reliable process over the last 3-4 years.

Companies have reported long delays in export license approvals—some lasting as long as several months. And once licenses are secured, the export quota does not allow companies to build up a stockpile of the material. Additionally, many applicants have seen their requests returned with additional information needed. All of these obstacles have been imposed on exports of the raw material only, as derivative products are mainly not required to obtain a license for export currently.

In the event that the full breadth of China’s export controls are enforced, individual products that contain these restricted minerals would also require a license. As a result, thousands of companies would then need to secure them, likely overwhelming the system. Companies would be misguided to think they can rely on a fast approval for an export license to secure their individual products in the event that the trade truce expires in a few months. Documented experiences over the past three years suggest that the process is drawn-out, tedious, and highly unpredictable.

Another key consideration is critical mineral supplies outside of China. While the US and other governments around the world have been attempting to invest in new critical mineral mines and processing facilities, the reality is that the supply available outside of China is inadequate to replace current demand (which is being largely fulfilled by China). In one case, the IEA estimates that for battery supply chains, only 25% of the demand could be fulfilled outside of China.

All this points to one reality: if the export license requirements are fully enforced in January, the disruption to all industries and products that use the materials restricted by China could be severe, with limited alternative supply sources available in the short to even medium term (1-5 years).

Which Industries Will Be Most Exposed?

Industries that rely on the unique properties of critical minerals and rare earth elements (REEs) to achieve high performance in their products will generally be most impacted. The medical device, aerospace, military, automotive, and electronics sectors stand out as having large exposure to critical minerals, and many other sectors rely on critical minerals in niche areas for specific applications. While some sectors may be able to identify suitable temporary alternatives if the supply of critical minerals is restricted by China, many sectors rely on small amounts of irreplaceable critical minerals to achieve specific performance specifications.

High-performance magnets are a great example. While only trace amounts of critical minerals are part of these magnet formulations, they can enhance magnetic strength and operating temperature range. There are no substitutes for these materials in high-performance magnets, and therefore any restriction of critical minerals imposed by China will have major impacts on the production of these high-performance magnets.

Could the Status Quo Change for the Better?

Any high-level talks between the U.S. and Chinese leaders are likely to result in a discussion around the current trade truce. There may not be any major obvious signaling from either side, however, so much as posturing. Despite the realities of these dynamics and the political optics observers will have to sift through, there are a few indicators to watch for:

China’s purchases of key commodities

In the trade truce secured last year, China agreed to purchase soybeans, timber, and sorghum. While it appears that many of these products have been purchased by China, the question is if the volumes are satisfactory to Trump administration officials.

Media mentions

Discussions of the trade truce by administration officials from either country, and/or business leaders from the U.S. and China could serve as an early indication of how consequential—and potentially beneficial—the results of the talks could be.

Conversely, if any additional posturing occurs leading up to the deadline, it could mean that a deal may be harder to reach. If the U.S. applies additional sanctions or tariffs to China, or China expands its export license requirements to additional products, these would be examples of further posturing.

How Can Companies Prepare for a Worst-Case Scenario?

In the event that the U.S.-China Busan Agreement expires in early January, and China’s critical mineral export restrictions are fully enforced, the impacts will likely be felt very quickly. The first key step companies will need to take if this were to happen is to identify what critical minerals are used in their parts and products.

Supply chain risk management (SCRM) tool Z2 can simplify this process. Z2 offers out-of-the-box full material declaration (FMD) documents that break down the mineral contents of each part. And the solution’s highly customized contacting service can streamline the process of collecting any remaining FMDs, giving your company full visibility into the impact Chinese export restrictions can have on your supply chain.

Once companies have identified the critical minerals in their parts, the next step is to create a plan to identify alternate companies, as well as gain a better understanding of the supply chains around impacted products. Z2 can help companies identify alternate components (and Z2 can collect/provide FMDs for alternates as well) with similar properties, while also helping businesses identify where specific critical minerals and REEs are being sourced from.

When it comes to starting the process and identifying the critical minerals in your components, now is truly as good a time as any. To learn about how Z2 can help businesses assess their exposure to critical minerals and REEs primarily processed in China, schedule a free trial with one of our product experts.