US and China Escalate Rare Earths Rivalry

- China's dominance extends across the entire rare earth supply chain, controlling approximately 70% of global mining and over 90% of processing and refining capacity. This strategic control allows Beijing to influence global supply and pricing, a leverage it has used in diplomatic disputes. - In response to U.S. tariffs, China implemented two waves of export controls on rare earth elements in April and October 2025, citing national security. However, facing a potential escalation in the trade war, Beijing temporarily suspended the second, more extensive, set of controls from November 2025 until November 2026. - Project Vault is designed to create a strategic reserve for the civilian manufacturing sector, distinguishing it from the defense-focused National Defense Stockpile. The initiative has already attracted participation from major industrial companies like General Motors, Boeing, and Google, who can gain stabilized access to materials in exchange for upfront fees and purchase commitments. - The U.S. Department of Energy is actively funding projects to recover rare earth elements from unconventional domestic sources such as mine tailings and e-waste. This initiative is part of a broader strategy to develop a full-scale domestic rare earth extraction and separation industry, reducing reliance on foreign sources. - The rivalry poses significant risks for manufacturers, particularly in the automotive and electronics sectors. Following China's export restrictions in April 2025, Chinese exports of rare earth magnets dropped 51% in a month, leading to production halts at some European automotive plants. - An F-35 fighter jet requires approximately 920 pounds of rare earth materials, and the Department of Defense has identified these elements as critical in over 200 weapon systems. This defense-industrial base dependency underscores the national security dimension of the rivalry, as supply disruptions could directly impact military readiness. - Environmental regulations for mining and processing rare earths are a key consideration for reshoring efforts. In China, the production of one ton of rare earths can generate about one ton of radioactive waste. In the U.S., any new mining and processing facilities will be subject to EPA and OSHA regulations covering wastewater discharge, air quality, and worker safety. - Beyond government stockpiles, the U.S. is using the CHIPS Act to directly fund the development of an integrated domestic supply chain. One significant investment combines $277 million in federal funding and a $1.3 billion loan guarantee to support a Texas-based project aiming to mine and process heavy rare earths and manufacture magnets in Oklahoma.