China Signals Rare Earths as Leverage in US Rivalry
Chinese Premier Li Qiang's recent inspection of rare earth facilities signals Beijing's willingness to use its dominance over the critical minerals as a "bargaining chip" in its rivalry with the U.S. China's industrial policies, including a 2026 auto stimulus, are also incentivizing domestic demand, further tightening global supply. The moves come as Western nations race to secure their own mineral resources to reduce supply chain dependencies.
- China's dominance extends across the entire supply chain; it accounts for approximately 70% of global rare earth mining, 85-90% of refining and processing, and over 90% of the manufacturing of high-strength rare earth permanent magnets. This concentration of processing capability is a more significant choke point than the mining of the ores themselves. - The U.S. military's advanced weaponry is heavily dependent on rare earths; an F-35 fighter jet requires about 418 kg of these elements, an Arleigh Burke-class destroyer uses approximately 2,600 kg, and a Virginia-class submarine needs around 4,600 kg for systems like missile guidance, radar, and propulsion. - In response to U.S. tariffs, China implemented export controls on several rare earth elements and related technologies in April and October 2025, requiring buyers to detail the end-use of the materials before purchase approval. These actions followed a history of using rare earths as leverage, including a 2010 export halt to Japan during a territorial dispute. - The U.S. Department of Commerce and Department of Energy have initiated significant funding to rebuild a domestic supply chain, including a $1.6 billion investment in USA Rare Earth to develop a Texas mine and an Oklahoma magnet facility. The Department of Energy has also announced up to $134 million to support commercial-scale refining from unconventional sources like mine tailings and e-waste. - The automotive sector, particularly EV manufacturing, is vulnerable to supply disruptions, as each EV requires one to two kilograms of rare earth magnets for its motor. In 2025, stricter Chinese export licensing led to depleted stockpiles and production halts at some European automotive plants. - Western diversification efforts extend beyond domestic production, with U.S. backing for projects in allied nations, including the Monte Muambe project in Mozambique, the Phalaborwa project in South Africa, and Brazil's Serra Verde mine to create alternative, non-Chinese supply sources. - Japan, having faced Chinese export bans in 2010, has actively worked to reduce its dependency, lowering its reliance on Chinese rare earths from 90% in 2010 to 60% in 2023. More recently, Japan has successfully tested deep-sea mining technology to extract rare earth-bearing mud from the ocean floor near Minami-Torishima Island. - Despite their name, rare earth elements are relatively abundant in the Earth's crust, but they are rarely found in economically exploitable concentrations, and the complex, environmentally challenging process of separating them into usable high-purity metals creates a significant bottleneck.
