Most importantly, the United States is dangerously dependent on rare earth elements for its defense technology sector. This heavy reliance presents a dangerous vulnerability, most critically for many cutting edge military use cases. The Center for Strategic and International Studies (CSIS) recently drew attention to this very important vulnerability for the U.S. This would be particularly alarming considering China’s de facto monopoly on processing heavy rare earths. Recent export controls imposed by China on key rare earth elements jeopardize the stability of the U.S. supply chain, potentially disrupting operations for several American firms.
Rare earth elements, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, are vital for producing defense technologies, energy solutions, and automotive components. In light of increasing geopolitical pressures, China has started using highly restrictive export controls on seven of the most critical elements. For one, Chinese firms have to obtain special permits to export these resources. This unfortunate move will profoundly weaken U.S. military readiness and innovation.
The CSIS report articulates the gravity of the situation, stating, “The United States is particularly vulnerable for these supply chains.” The report further emphasizes that “there is no heavy rare earths separation happening in the United States at present,” highlighting a critical gap in domestic capabilities. If China plays hardball with a ban on the export of medium and heavy rare earth materials, the U.S. will be in a world of hurt. Filling that shortfall will be a Herculean task.
The impact of these restrictions goes far beyond short-term supply chain issues. The Department of Defense (DOD) has a goal to develop a reliable domestic supply chain for rare earth elements. This supply chain will ensure that the U.S. is ready to meet any and all defense requirements by 2027. Since 2020, the DOD has invested over $439 million. This is seen as a vital step toward increasing domestic mining and processing facilities for heavy rare earths. Beware, warn experts—overnight capability is unrealistic, and developing these capabilities requires a long-term commitment. CSIS advised that “developing mining and processing capabilities requires a long-term effort, meaning the United States will be on the back foot for the foreseeable future.”
China’s stranglehold on the rare earth supply continues to ring alarm bells in Washington. Already, other countries, such as Australia and Brazil, are reacting by putting significant investments into their own domestic supply chains. This competition highlights the global race for critical minerals, with countries seeking alternatives to mitigate dependency on Chinese resources. The report warns that “further bans on critical minerals inputs will only widen the gap, enabling China to strengthen its military capabilities more quickly than the United States.”
Further compounding the problem, other critical minerals—such as cobalt and palladium—exist almost exclusively in countries aligned with Beijing’s anti-American, anti-West interests. This concentration presents severe obstacles for all sectors that depend on these vital resources. Under these circumstances, the United States needs to act even more urgently to mitigate supply risks by diversifying its mineral sources and reducing reliance on foreign supplies.
China is in a stellar race to churn out and acquire advanced, cutting edge weapon systems and equipment. This rate is said to be five to six times the pace of the United States. This relentless pace of development is causing concern regarding U.S. military readiness and technological superiority between the two countries.
“The weaponising of this control over critical minerals — and the race by other countries to secure alternative supplies — will be a central feature of a fractured global economy,” – Neil Shearing, group chief economist at Capital Economics.