America’s fight for rare-earth security

The US is racing to secure supplies of rare-earth metals – the obscure but indispensable elements that power everything from electric vehicles (EVs) and wind turbines to fighter jets and smartphones. This scramble is not just about economics – it is about sovereignty and security. Rare earths have become as strategically vital to new technologies as crude oil was to the industrial age. 

This week, China temporarily lifted export controls on rare earths and other critical minerals, granting a one-year reprieve to global manufacturers reliant on these materials for electric vehicles, semiconductors and defence systems. However, Washington is determined to loosen China’s grip on a supply chain that has rapidly become a geopolitical pressure point.

Why rare-earths matter

Rare-earth elements – a group of 17 metals including neodymium, dysprosium and terbium – are critical for high-performance magnets, semiconductors and advanced defence systems. They are the backbone of clean-energy technologies and next-generation electronics. Demand is soaring, with global consumption of magnetic rare-earths projected to triple by 2035, driven by EVs and renewable-energy projects.

In short, without neodymium and dysprosium, the clean-energy transition and modern defence capabilities would stall, making them not just industrial commodities but strategic assets in the US-China rivalry.

China’s industrial fortress

China dominates every stage of the rare-earth value chain: around 70% of global mining, 90% of refining and nearly all magnet production. This dominance is no accident – it stems from four decades of state-backed investment, environmental tolerance and industrial consolidation that Western democracies have been unwilling or unable to match.

China’s grip is reinforced by three “locks”:

• Resource lock: it holds the world’s most economical deposits of heavy rare earths such as dysprosium and terbium.
• Technology lock: Beijing has mastered complex separation processes and banned export of this know-how, creating a technical moat.
• Ecosystem lock: China has built a complete mine-to-magnet industrial chain, supported by massive domestic demand from its EV and wind sectors, making Western competitors economically unviable from the start.

Weaponising minerals

This market dominance gives Beijing leverage – and it has repeatedly used rare-earths as a bargaining chip. In 2010, Beijing abruptly halted shipments to Japan during a territorial dispute. The move followed the arrest of a Chinese fishing boat captain after a collision near the contested Senkaku/Diaoyu Islands in the East China Sea.

Although China never announced an official ban, Japanese importers reported that customs stopped processing exports for nearly two months. At the time, China controlled about 90% of global rare-earth supply. The embargo sent prices soaring.

Japan scrambled to respond, launching a strategy to diversify sources, recycle rare earths from electronic waste, develop substitutes and build stockpiles. The episode also triggered wider efforts to reduce reliance on China, though Beijing still dominates processing capacity today.

The 2010 standoff remains a case study in how resource leverage can be used as a diplomatic weapon – and why securing critical minerals has become a priority for governments worldwide.

Earlier this year, Beijing used a rare-earth squeeze to force a tariff retreat from Donald Trump. China’s restrictions, announced in April and widened in October, targeted seven rare-earth elements and rare-earth magnets, causing immediate supply disruptions for automakers and defence contractors. The timing – just ahead of President Xi Jinping’s summit with Donald Trump – was no coincidence. 

This economic coercion worked – and demonstrated that not all the cards in the current administration’s trade dispute are held in Washington. At the Busan summit in late October, President Trump agreed to scale back tariffs – including halving a fentanyl-related levy – and suspend plans for new technology export controls. In return, President Xi pledged to pause rare-earth export restrictions for one year and resume shipments to US companies. China also secured flexibility: earlier curbs on some minerals remained, and Beijing retained the ability to reimpose controls after the truce expires.

Beyond tariff relief, China demonstrated the durability of its “industrial fortress”. The episode reinforced China’s pricing power, preserved its export control framework, and underscored a strategic truth: in the race for critical minerals, time is on China’s side. 

America’s counteroffensive

The US response is multi-pronged and increasingly muscular. Recent moves include:

• Industrial policy: Invoking the Defence Production Act to fast-track mining permits and classify rare-earth development as a national security priority.
• Strategic financing: The Export-Import Bank issued a $200m letter of interest to REAlloys Inc to build North America’s first integrated mine-to-magnet supply chain, linking Canadian deposits to US magnet plants.
• Allied partnerships: Washington signed an $8.5bn deal with Australia to co-develop mining and refining projects, alongside similar agreements with Japan, Malaysia and other Indo-Pacific nations.
• Technology acquisition: USA Rare Earth’s purchase of UK-based Less Common Metals (LCM) filled a critical gap in America’s magnet production capability. LCM, based in Cheshire, is the only proven ex-China manufacturer capable of producing both light and heavy rare-earth permanent magnet metals and alloys at scale. By combining LCM’s alloy-making expertise with USA Rare Earth’s Round Top mine in Texas and its 311,000 square foot magnet plant under construction in Oklahoma, the deal creates the first integrated mine-to-magnet supply chain in the West.
• Recycling initiatives: US companies are investing in magnet recycling technologies to recover neodymium and dysprosium from end-of-life products, a faster and greener route to supply security.

The G7 has pledged coordinated stockpiling, price floors and long-term offtake agreements to stabilise markets and incentivise investment. 

The stakes go beyond economics. Rare-earths are embedded in America’s defence architecture – from radar systems to missile guidance. Dependence on a strategic competitor for such inputs is untenable. 

Moreover, the demand curve is steep. The International Energy Agency projects a 60% increase in rare-earth demand by 2040, with clean energy and EVs accounting for the lion’s share. Without diversification, the West risks supply shocks that could derail climate goals and compromise military readiness.

For Beijing, rare-earths are more than a resource – they are leverage. China’s calculus is simple: building a mine-to-magnet supply chain takes 10-15 years, while semiconductor technologies – the US’s own chokepoint – become obsolete in five. Time favours Beijing. Even if Western projects break ground today, they will not dent China’s dominance this decade.

The bottom line

Short-term, the US will lean on allies and recycling. Over the medium-term, expect regional supply chains backed by government financing. However, over the long-term, the race hinges on technology – which countries can innovate the fastest in processing and magnet manufacturing. Even then, China’s integrated ecosystem and scale mean it will remain dominant for many years. Rare earths have moved from the margins of commodity markets to the centre of geopolitics. The West can reduce dependence, but breaking Beijing’s grip entirely may prove elusive.