Rare earth elements have emerged as critical components in the technological competition between the United States of America and China. These 17 metals serve as essential inputs for advanced technologies, ranging from smartphones and electric vehicles to wind turbines and precision-guided weapons systems. The current trade tensions between Washington and Beijing have brought into sharp focus the fundamental vulnerabilities created by the global dependence on Chinese-controlled rare earth supplies.
China’s current position as the world’s primary rare earth supplier results from decades of deliberate industrial policy. Beginning in the 1990s, Chinese producers implemented a calculated strategy of flooding global markets with inexpensive rare earth exports, systematically driving international competitors out of business through aggressive pricing tactics. This approach proved remarkably successful, leading to
the collapse of the once-thriving American rare earth industry, exemplified by the 2015 bankruptcy of California’s Mountain Pass mine, previously the largest rare earth producer outside China.
Today, China maintains comprehensive control over the entire rare earth value chain, commanding approximately 60% of global mining output, 85% of processing capacity, and an overwhelming 90% of permanent magnet production. This vertical integration provides Beijing with substantial geopolitical leverage, as demonstrated during the 2010 territorial dispute with Japan when China restricted rare earth exports, causing prices of certain elements to increase by more than 600%.
The Joe Biden administration’s tariff measures, including substantial duties on Chinese electric vehicles and rare earth permanent magnets, aimed to reduce reliance on Chinese supplies. However, these policies created a paradoxical situation by targeting products that themselves depend heavily on Chinese rare earth inputs. The American electric vehicle industry is a case in point. The defence sector presents an even more pressing concern, with advanced weapons platforms like the F-35 fighter jets and precision-guided munitions remaining dependent on rare earth components sourced primarily from China.
Efforts to diversify rare earth supply chains outside China encounter numerous obstacles. The recently-revived Mountain Pass mine produces valuable rare earth ore but the material must still be exported to China for processing due to the absence of domestic refining capacity. Western rare earth projects also face substantial cost disadvantages compared to Chinese producers. These increased costs stem from multiple factors, including stricter environmental regulations, higher labour expenses, and lack of existing infrastructure.
Addressing these challenges requires a comprehensive, multilateral strategy that balances immediate security needs with long-term supply chain development. Expanding strategic stockpiles of critical rare earths could provide an important buffer against potential supply disruptions. Streamlining permitting processes for sustainable mining and processing projects could help reduce the cost differential with Chinese producers. Significant investments in recycling technologies and circular economy solutions could decrease dependence on primary mining and address environmental concerns. Most critically, enhanced international cooperation will prove essential for building resilient supply chains.
The current trade tensions have demonstrated that rare earth elements have transitioned from industrial commodities to strategic assets. While tariffs may offer temporary protection for domestic industries, they cannot resolve the asymmetries in rare earth supply chains. The path forward demands sustained investment, international cooperation, and technological innovation, requiring strategic vision and persistent effort across public and private sectors.
Upasna Mishra is a PhD scholar, School of International Relations and Strategic Studies, Jadavpur University