China tightens grip on rare earths as US scrambles for supply

China possesses the key resources and technology that can significantly influence the American economy. Export restrictions on strong magnets and key rare earth metals already serve as a "lever" to control manufacturers in several industries, from LEDs to chips to engines and weaponry.

The trade war between the USA and China is intensifying. The cycle of tariffs is escalating the economic conflict between these powers. Beijing is responding tit-for-tat, matching American tariffs with equivalent rates. In response to restrictions related to semiconductors, it has restricted the export of key raw materials.

China has a powerful arsenal in the form of exports of rare earth metals and their refinement. It is unclear how much further they are willing to go. This conflict is escalating, but the question is how far the American administration will push and whether the U.S. has the resolve should Beijing resort to more drastic measures, as noted by Filip Rudnik, an analyst at the Center for Eastern Studies.

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Deng Xiaoping, a prominent Chinese politician from the 1990s, famously stated that just as The Middle East possesses its oil reserves, while China holds control over rare earth elements. (1) China leads the refining industry and has taken control of the market. In response to growing trade limitations enforced by the U.S. government against China, Beijing is increasingly regulating the exports of materials including gallium, germanium, and critical minerals such as tungsten. On April 10, an additional seven rare-earth based product categories were included in the earlier list, featuring elements such as samarium, gadolinium, and terbium. This compilation might be extended to encompass additional scarce elements like tantalum, which is utilized in making electrolytic capacitors.

China has also implemented limitations on neodymium and praseodymium, which are mainly utilized in magnet production. These rare-earth-based magnets possess greater strength and value, making them essential components in the manufacturing of electric vehicles.

China establishes a "lever"

As Maciej Kalwasiński of OSW pointed out in early April, even though raw materials may come from different parts of the globe, China stands out because it has established an industrial hub for processing them. This infrastructure has long been leveraged by the USA.

Documented Production in China (based on the most recent data from 2023) amounted to 240,000 metric tons. The USA took the second position with 43,000 metric tons, followed by Myanmar with 38,000 metric tons, and then comes Australia with 18,000 metric tons. As a result, China possesses 87 percent of the global refining capacity.

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Approximately 90 percent of rare earth magnets are manufactured in China, and about 99.9 percent of global dysprosium extraction, which is utilized by chip maker Nvidia for producing capacitors, occurs in China, as reported by The New York Times.

As highlighted in the Critical Raw Materials Alliance (CRMA) report, China accounts for 80 percent of the world's gallium production and 60 percent of germanium.

The gap between the USA and China is considerable. Statistics from early January indicate that China has 44 million metric tons of mineable rare earth metals. Following China, Vietnam has 22 million metric tons, and Brazil has 21 million metric tons. The United States has access to 1.8 million metric tons.

The tool of pressure is further restricting the export of critical raw materials on which the USA heavily relies, such as graphite or rare earth metals crucial for the defense industry and green technologies, as noted by Dominik Kopiński from PIE in early April.

The United States depends on goods imported from China.

China has more effectively seized the economic opportunity compared to others. As the "NYT" points out, way back in the 1980s, the US led in the production of rare earth elements, controlling about one-third of the worldwide market.

Today, only one large rare earth element mine operates in the USA, located at Mountain Pass in California, which extracts about 15 percent of the world's rare earth resources.

Smaller operations include obtaining bastnaesite, a fluoro-carbonate mineral from the rare earth elements group, at the Mountain Pass mine in California. "Monazite was stored as a separate concentrate or included as an associated mineral in heavy sands concentrates in the southeastern United States. Mixed rare earth compounds were also produced in the western United States. The estimated value of rare earth compounds and metals imported by the USA in 2024 was $170 million, which is an 11 percent decrease compared to $186 million in 2023," according to the Mineral Commodity Summaries 2025 (USGS).

For many years, the USA has depended on imported rare earth elements and metals. Approximately seventy percent of these imports originate from China, thirteen percent from Malaysia, six percent from Japan, and five percent from Estonia. The remaining six percent comes from various other sources combined.

Their significance to the U.S. economy cannot be overstated since they play crucial roles in manufacturing numerous products such as widely-used LED lamps, photovoltaic cells, motors for electric vehicles, and processors driving artificial intelligence systems and mobile phones. Additionally, these elements are vital parts in devices like unmanned aerial vehicles, cruise missiles, and combat aircraft.

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If there were a complete halt in the production of powerful magnets crafted from rare earth elements, which are crucial to the core of America’s car manufacturing sector based in Detroit, this area would face significant hardship. Such an interruption could lead to a scarcity of essential chemicals for manufacturing jet engines, lasers, car headlights, as well as certain spark plugs , or capacitors.

The New York Times reports that certain American companies have been accumulating rare earth elements for years in preparation for a potential trade conflict. However, there is uncertainty about how long these stockpiles would suffice if China were to suspend exports.

Trump aims to find a way out of his dilemma.

The contest for accessing rare earth elements has emerged as a key aspect of geopolitical strategy. Trump clearly understands the significance of achieving autonomy from China and securing dominance over these critical assets, observes Filip Rudnik.

This is why Trump is keen to ink a deal with Ukraine. On Thursday, the U.S. and Ukraine signed a letter of intent outlining an arrangement for the U.S. to tap into Ukrainian mineral resources.

Among the biggest lithium reserves in Europe can be found in Ukraine, with estimates reaching up to 500,000 metric tons. This element is crucial for manufacturing batteries used in electric cars and more. Additionally, regions hosting these lithium deposits contain significant amounts of manganese, nickel, and cobalt as well.

In addition to Ukraine, various areas are being considered by the Trump administration as possible locations for US mining operations. The U.S. also identifies strategic advantages in Greenland’s territories.

The issue could lie with the Greenlanders themselves, who may resist becoming part of a U.S. territory and a large-scale mining operation for precious resources, notes Rudnik.

Moscow has likewise taken advantage of the situation. Putin provides Donald Trump with access to various resources, including uncommon earth elements or holdings in aluminum companies initiatives in the Arctic, aiming to surpass Ukraine's proposal.

Russia is carefully monitoring the conflict between the USA and China. They stand prepared to intervene, aiming to capitalize on the scenario should China completely clash with the USA. These proposals from them are seen as an integral part of their approach, according to remarks made by an OSW analyst.

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However, according to Rudnik, this could be like buying a "pig in a poke." Russia understands its resources well and can determine them precisely. The problem lies in deposits being far from export corridors; initiating such projects would be very costly and time-consuming. It would be a distant investment with uncertain returns. Moreover, Russian rare earth metals are estimated at 10 million metric tons, representing 2 percent of global resources. Additionally, Russia lacks the refining capability that China has. Despite closer ties with Moscow, they do not share the necessary technology, concludes Rudnik.

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