Our trade war with China is heating up. Rare earth elements have become an important dimension of this conflict. These 17 rare earth elements—like neodymium, dysprosium, yttrium, and gadolinium—are essential to a range of important technologies. In addition, they serve important humanitarian, military, and civilian purposes. China accounted for approximately 70% of the world’s rare earth production in 2021. As the country with the largest reserves, it has ample leverage in this high-stakes economic conflict.
As electronics have shrunk, rare earths have only grown in importance. The United States does just that, by failing to treat them as vital to its national security. This status is very similar to the status enjoyed by oil in the last century. Many American technology companies rely heavily on Chinese exports of rare earths, which has made the U.S. dependent on its rival for key materials necessary for advanced technologies, including military equipment.
As the trade war escalates, China has already started to leverage rare earths as an economic cudgel, adding them to the list of weapons in this undeclared trade war. Beijing has now placed restrictions on the export of these materials, adding fuel to an already conflagrated relationship with the U.S. In light of these challenges, the United States is racing to establish a domestic rare earth industry. In that effort, the EU is hoping to reduce its overall reliance on Chinese imports.
The Strategic Importance of Rare Earths
Rare earth elements are a group of 17 chemical elements. They’re key to the many applications driving our current technology revolution—from smartphones to smart sensors. They are vital to the production of critical and emerging technology components, including for advanced electronics, electric vehicles and military hardware. From F-35 joint strike aircraft to our nuclear submarines to our Tomahawk missiles, all require kilos of rare earths for maximum effectiveness and operational capabilities.
The strategic importance of these factors is hard to overstate. American Rare Earths director Mel Sanderson noted that China developed that list with a long-term plan. In other words, they picked stuff that’s really important for the US economic competitiveness. This highlights just how vital rare earths are for continued technological superiority and military readiness.
China’s dominance in the rare earth market provides it with considerable leverage over global supply chains. It accounts for roughly 70% of the country’s total output. That gives it huge power role in price-setting and determining product availability. The U.S. has recognized this vulnerability and is striving to secure a reliable supply chain for rare earths to safeguard its industrial and national security.
Race to Develop Domestic Supply Chains
The United States is making a concerted push to grow its own domestic industry. This response is timely, given that China continues to consolidate its control over rare earths. The Mountain Pass mining site in California is the only American operation that has operated in decades. It is still inextricably tied to China for its refining processes. Together, this dependency poses a major risk to U.S. national security and economic security.
MP Materials emphasized the need for a robust supply chain within the U.S., stating, “America must secure an end-to-end rare earth supply chain to protect its industrial and national security.” These words illustrate an emerging bipartisan agreement among lawmakers and the defense industry that the U.S. must be self-sufficient when it comes to rare earth production.
The US is indeed looking for collaboration with other geographies. Their goal is to obtain the minerals from countries that are heavy in rare earth reserves. Greenland and Ukraine have emerged as new flashpoints, thanks to newly mined versions of their mineral wealth, notably rare earths. Greenland—an autonomous territory of the Kingdom of Denmark—is perhaps capturing the most attention from Washington, for a number of reasons.
China’s Reluctance to Relinquish Control
It will not be easy to pry China’s control over rare earths from its clutches. The country now considers these resources as one of the most important levers it holds in its trade war with the United States. By cutting off exports, China hopes to apply maximum pressure on U.S. industries that are most dependent on its materials.
This was echoed by US Vice President J.D. Vance, who said that a military invasion wouldn’t be necessary. He noted that economic instruments, like controlling rare earth exports, should continue to be the core of our geo-strategic arsenal. This sentiment is emblematic of a too-common aversion to escalation and the value of keeping the economic war chest full.
The strategic race for rare earth resources goes beyond short-term U.S.-China trade relations. As Thomas Kruemmer, Director of Ginger International Trade and Investment summed it up so well, he claimed, “Everything that you can turn on and off probably uses rare earths. These pieces are the foundation of today’s technology-driven society. They are essential not just to our civilian economy, but to the effectiveness of our military as well.”