Global implications of export controls on rare earths: a model-based assessment | 국외연구자료

KDI 경제교육·정보센터

Economic Information and Education Center

전망·동향

Global implications of export controls on rare earths: a model-based assessment

ECB

2026.04.09

This paper provides a structured assessment of the potential macroeconomic consequences associated with rare earth supply disruptions. First, it documents that exposure to rare earth supply disruptions is concentrated in high-tech and security-sensitive sectors including automotive, electronics and defence-related industries. Second, drawing on earlier episodes of Chinese export restrictions on critical minerals (notably in 2010 and 2023), it highlights two key mitigating forces from the targeted countries’ perspective: practical and strategic constraints on China’s ability to implement strict export bans, and innovation-led substitution by targeted countries. Third, the paper quantifies the global macroeconomic implications of a hypothetical scenario of stringent but partial Chinese export restrictions on rare earths lasting for 18 months. To do so, the analysis combines, for the various segments of the transmission chain, a partial equilibrium setup, a closed-economy DSGE model, and the multi-country multi-sector dynamic model of Aguilar et al. (2026). The main results, across specifications, suggest estimated output losses for the United States ranging between 0.3% and 0.6%, with the largest impacts concentrated in automotive and electronics manufacturing. The results at the same time highlight the sensitivity of model-based estimates to assumptions on the substitutability of rare earths and the severity of restrictions.

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