According to sources in the Korean transformer industry on Tuesday, at least two of its transformer manufacturers have received official notices from the Chinese government, demanding they cease exports of any power equipment containing Chinese-origin heavy rare earth metals to US military contractors or the US military.

The letters — which warned of possible sanctions or other penalties — mark the first known case of China imposing targeted export restrictions on a third country over its defense-related trade with the United States.

The ban specifically impacts South Korean transformer manufacturers, whose equipment often contains rare earth metals refined almost exclusively in China. These metals are essential for transformer cores and insulators used in transformers and other high-spec energy systems.

A recent order from Beijing requires special export licenses for six critical rare earth elements, with a processing time of approximately 45 days, effectively stalling shipments.

This escalation comes as part of China’s broader retaliation to new US tariffs on Chinese goods and highlights its growing use of export controls as geopolitical leverage.

With South Korea heavily reliant on exports in sectors like power equipment, semiconductors, and EVs, analysts warn the ripple effects could be significant. A Korean government official also confirmed that similar letters have been sent to companies in other strategic industries, though transformer manufacturers appear to be the first directly affected.

The development adds new urgency for Korean firms to seek supply chain diversification amid rising US-China trade tensions.

Source: kedglobal.com