Tensions between China and the United States have escalated as China imposes restrictions on rare earth element exports. This move further extends the ongoing trade dispute and directly impacts U.S. technological and defense industries. Rare earth elements, critical for advanced technology and military applications, are now subject to stringent controls. The situation underscores the United States’ reliance on China for these essential resources, with President Trump pushing for increased domestic production. But what makes these elements so valuable, and how do these export restrictions influence the international power struggle?
Rare Earths: Key Elements for Modern Technology
Rare earth elements, comprising 17 chemical elements, play a crucial role in modern technology. While abundant in nature, they rarely appear in pure forms and are difficult to extract, with significant environmental consequences. Despite their unfamiliar names—such as Neodymium, Yttrium, and Europium—the technologies that depend on these elements are widespread. Neodymium is essential for creating powerful magnets used in electric vehicles, jet engines, and computer hard drives. Meanwhile, Yttrium and Europium are used to enhance the color quality of display screens in televisions and computers. According to Thomas Kruemmer of Ginger International Trade and Investment, almost all electronic devices rely on rare earth elements to function properly. Additionally, these elements are vital in medical equipment like MRI machines and surgical lasers, and they are indispensable for advanced military technologies.
China’s Dominance in the Rare Earth Supply Chain
China holds a commanding position in the global rare earth market, both in production and processing. The International Energy Agency reports that China produces 61% of the world’s rare earths and processes an overwhelming 92% of the global supply. This monopoly allows China to control the flow of these critical materials, determining who receives shipments and who does not. Extracting and refining rare earth elements is an expensive and environmentally damaging process, with the additional challenge of radioactive waste. As a result, many countries, including those in the EU, have avoided pursuing domestic production. Kruemmer notes that permanent, compliant waste storage is unavailable in the EU, further complicating efforts to develop local refining capabilities. China’s dominance in this sector results from strategic investments and policy decisions dating back decades. In 1992, Chinese leader Deng Xiaoping famously stated, “The Middle East has oil; China has rare earths.” Since then, China has ramped up its mining and refining capabilities, often undercutting competitors by accepting lower labor and environmental standards.
US Faces Growing Risks as China Tightens Exports
China’s decision to restrict the export of seven rare earth elements in response to U.S. tariffs has significant consequences for American industries. These rare earth elements, many of which are classified as “heavy” rare earths, are critical for the U.S. defense sector. These elements are not only rare but also challenging to process, making them even more valuable. Starting April 4, businesses in the U.S. will need special licenses to import rare earths and associated magnets. As a signatory to the Non-Proliferation of Nuclear Weapons treaty, China has legal authority over dual-use items, which further complicates U.S. access to these materials. According to the Center for Strategic and International Studies (CSIS), the U.S. lacks the necessary infrastructure to process these heavy rare earth elements domestically, leaving it vulnerable to China’s export controls.
Between 2020 and 2023, China supplied approximately 70% of U.S. rare earth imports. These materials are critical for the production of defense technologies like the F-35 fighter jet, Tomahawk missiles, and Predator drones. Meanwhile, China has rapidly increased its munitions production, outpacing the U.S. in adopting new weapons systems. Kruemmer warns that disruptions in rare earth supplies could have a devastating effect on U.S. manufacturing and defense industries. Dr. Gavin Harper, a researcher at the University of Birmingham, notes that shortages of rare earths could lead to delays in production and rising costs across tech and defense sectors. He predicts that prices for these essential materials will rise sharply, affecting everything from smartphones to military equipment.
Limited Options for Domestic Rare Earth Production in the US
The United States faces significant challenges in boosting its domestic rare earth production. Currently, the U.S. operates just one rare earth mine, and it lacks the technology to process heavy rare earths domestically. As a result, the U.S. ships raw materials to China for refinement. This situation marks a stark contrast to the 1980s when U.S. companies dominated the rare earth industry. However, as China scaled up its mining operations and offered lower costs, American companies exited the sector. Now, President Trump is pushing for new partnerships to reduce U.S. dependence on Chinese rare earths. Ukraine and Greenland, both with significant reserves of rare earth elements, have drawn the attention of U.S. policymakers. Trump has even expressed interest in acquiring control over Greenland, which ranks eighth in global rare earth reserves. However, geopolitical tensions and diplomatic challenges could hinder these alternative supply routes. Dr. Harper highlights that the U.S. faces two critical problems: strained relations with China, the dominant supplier, and a lack of strong ties with potential alternative suppliers. Whether these nations will choose to cooperate with the U.S. remains uncertain, given the volatile global political climate.
As the U.S. grapples with the consequences of China’s rare earth export restrictions, the competition for these vital resources is intensifying. The U.S. must urgently address its dependency on China and invest in domestic production and processing capabilities. However, the path forward is fraught with geopolitical challenges and technological hurdles. As rare earth elements continue to play a pivotal role in global technology and defense, the race to secure these resources will shape international relations and technological development for years to come.