A sample of bastnaesite ore, a mineral used in the rare earth industry to extract elements such as cerium, lanthanum, and neodymium, at the Geological Museum of China in Beijing. China recently expanded its rare-earths export controls.Maxim Shemetov/Reuters
Angela Huyue Zhang is a professor of law at the University of Southern California.
China’s weaponization of rare-earth minerals has emerged as a major flash point in U.S.-China trade negotiations. Further proof of this was supplied last week with China’s decision to curb rare-earth exports, and U.S. President Donald Trump’s threat to impose 100-per-cent tariffs on Chinese imports in retaliation.
These critical materials, especially the high-performance magnets they make possible, are vital components in electric vehicles, wind turbines, industrial robotics and advanced defence systems. In response to China’s strict rare-earths export controls, the United States has quietly lowered tariffs, relaxed export controls on AI chips, and even softened visa restrictions for Chinese students. At the same time, the U.S. is scrambling to secure alternative supplies. In July, the Department of Defense announced a landmark multi-billion-dollar investment package to boost MP Materials, the company behind America’s flagship rare-earths project. But what if, despite massive subsidies and years of effort, the U.S. still can’t escape its dependence on Chinese rare earths?
Japan offers a cautionary tale. In 2010, following a maritime standoff over the Senkaku Islands, China abruptly cut off rare-earths exports to Japan. In response, the Japanese government pursued a series of strategic measures: investing in an Australian producer; boosting domestic research and development; forging its own commercial partnerships with Chinese manufacturers; and building strategic stockpiles. More than a decade later, Japan still sources over 70 per cent of its rare-earths imports from China.
China’s rare-earths dominance wasn’t built overnight, and it won’t be easily eroded. Its strength does not lie in hoarding raw materials, but in the industrial capacity to refine, process and produce at scale. Today, China controls between 85 and 90 per cent of the world’s rare-earths refining capacity, and produces roughly 90 per cent of the globe’s high-performance rare-earths magnets. It is the only country with a fully vertically integrated rare-earths supply chain – from mining to chemical separation to magnet fabrication.
Between 1950 and 2018, China filed more than 25,000 rare-earths-related patents, more than twice the number filed in the U.S. Decades of hands-on experience in the complex chemistry of rare-earths processing have yielded a depth of expertise that Western firms cannot easily replicate. In 2023, China imposed sweeping export bans on the technologies behind rare-earths extraction, separation and magnet production. The country’s lax environmental regulations have also given its firms a powerful advantage, allowing production to expand rapidly at low cost. The country also waited patiently as Western dependence on rare-earths magnets increased exponentially with the global green transition, which created massive demand for EVs and wind turbines.
Even if the West succeeds in building a parallel supply chain for today’s rare-earths needs, tomorrow’s chokepoints may lie elsewhere. Quantum computing, for example, increasingly depends on rare isotopes like ytterbium-171, as well as on elements such as erbium and yttrium. These emerging applications could become the next pressure points, leaving the U.S. and its allies once again racing to catch up.
The U.S. must confront an uncomfortable truth: China’s dominance in rare earths is likely to endure for the foreseeable future. Defensive strategies like supply-chain diversification may address some vulnerabilities, but true resilience demands an offensive strategy. The U.S. still holds many valuable cards. As long as it retains control over technologies or infrastructure that China cannot live without – be it advanced chips, frontier AI models, and access to the dollar-based financial system – China has a strong incentive to keep rare earths flowing.
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Since the first Trump administration, the U.S. playbook has been to blacklist leading Chinese tech firms and tighten export controls on cutting-edge chips. While these measures initially hobbled Chinese firms, slowing the country’s AI development, they have proved difficult to enforce. Riddled with loopholes, they created opportunities for enforcement arbitrage. As outgoing U.S. commerce secretary Gina Raimondo conceded in 2024, “Trying to hold China back is a fool’s errand.”
At the same time, U.S. export controls have galvanized efforts in China to build indigenous alternatives, effectively accelerating the rise of national champions like Huawei. Far from strengthening American leverage over China, U.S. policy is steadily eroding it. If you are Nvidia, losing access to the Chinese market doesn’t just mean forfeiting billions in revenue. It means losing influence over the most important AI ecosystem for developers outside the U.S.
Recent policy shifts suggest that this realization is starting to take hold. The Trump administration’s decision to relax restrictions on sales of Nvidia’s H20 chips to China signals a move away from blanket bans and toward more calibrated engagement. Counterintuitively, such engagement may be a smarter form of de-risking. The more that China relies on American technology, the more deeply the two sides’ supply chains will become entangled, and the harder it will become for China to weaponize its own strategic assets, including rare earths.
Copyright: Project Syndicate, 2025. www.project-syndicate.org