US vs China Tariff War Eclipses Potentially Bigger Threat: The Strategic Implications of China’s Rare Earths Leverage & Beijing's Willingness To Apply It.
Beijing Puts Washington on Notice with Export Control Announcement Affecting Crucial Rare Earth Minerals.
The ongoing Tariff war has eclipsed potentially more dangerous development in the medium to long-term: Beijing curbing America’s access to rare earth minerals.
China’s decision to impose export controls on a curated list of rare earth minerals used in U.S. defense, aerospace, and high-tech industries is not just economic maneuvering and one of the typical responses to the U.S. trade war measures.
It is a clear signal of intent to weaponize supply chain dependencies in a new era of strategic rivalry—and an area in which Beijing holds an overwhelming advantage.
Just as Trump’s tariffs exposed flaws in U.S. industrial policy, China’s rare earth play underscores a dangerous vulnerability: the U.S. may remain the global financial hegemon, but it is critically dependent on China for the materials underpinning the technologies of 21st-century warfare and innovation.
Not a Ban—Yet: But the Message Is Loud and Clear.
Technically, Beijing has not enacted a full export ban on the seven rare earths in question (yttrium, dysprosium, gadolinium, lutetium, samarium, scandium, and terbium).
Instead, it has placed them under export licensing regimes—meaning all sales now require official approval.
In practice, this gives Chinese authorities the flexibility to selectively deny or delay shipments while maintaining plausible deniability under WTO rules.
It’s an economic scalpel, not a hammer—but one that could cut very deep indeed.
The seven rare earth elements subject to new controls are:
Yttrium (Y) – critical for LED displays, superconductors, and laser targeting systems.
Dysprosium (Dy) – used in permanent magnets for EV motors and missile guidance systems.
Gadolinium (Gd) – key in MRI contrast agents and neutron shielding in nuclear reactors.
Lutetium (Lu) – used in PET scanners, catalysts, and advanced optics.
Samarium (Sm) – crucial for samarium-cobalt magnets in missiles and aircraft systems.
Scandium (Sc) – valued for high-strength aluminum alloys in aerospace applications.
Terbium (Tb) – used in green phosphors for display screens and high-performance magnets.
They are foundational inputs for:
F-35 fighter jets
Long-range missile guidance systems
Electric vehicle batteries and motors
LED displays and semiconductors
MRI machines and advanced medical diagnostics
70%-80% of U.S. rare earth imports come directly from China.
Processing capacity outside of China remains nascent.
This is not just economic leverage—it’s a pressure point on the U.S. national security apparatus.
This Is Not About the Ores: It’s About What Happens After.
It is a common misconception that China’s rare earth dominance lies in mining.
In fact, China accounts for only about 70% of global rare earth ore production.
But then it crucially dominates over 90% of rare earth processing—the conversion of raw ores into usable metals and high-grade oxides required by industry.
This distinction is critical.
Mining exists in the U.S., Brazil, Vietnam, Myanmar, and Australia.
But without processing, the ores are worthless to most industrial end users.
And outside of China, there are very few facilities capable of this—California, Estonia, Malaysia, and (recently) Canada being rare exceptions.
It is a highly polluting and technically complex process.
And for decades, the West offshored it—first for cost reasons, and later because no one wanted it in their environmental backyard.
That decision now carries a steep strategic price.
In The Short-Term, The U.S. Has Reserves: But That’s Not a Solution In The Medium To Long Term.
In the short term, U.S. strategic stockpiles can mitigate disruption.
But those reserves are limited—and rationing will inevitably favor defense applications over civilian industries.
(side note: The exact quantities of rare earth elements (REEs) in the U.S. strategic reserves are not publicly disclosed, so there is a lot of public uncertainty about their adequacy in the event of supply disruptions. The National Defense Stockpile (NDS), managed by the Defense Logistics Agency, is responsible for maintaining reserves of strategic materials, including REEs. However, reports suggest a significant gap—estimated at $13.5 billion—between the current stockpile and the required levels of critical minerals.)
EVs, consumer tech, and even industrial renewables could see cascading supply shocks.
Meanwhile, rebuilding processing capacity in the U.S. or allied countries will take years and billions in investment.
This is not like buying oil on the spot market. The rare earth supply chain is brittle, non-substitutable, and technologically unforgiving.
With all that said however, early in 2024, the DoD was on track to achieve its goal to securing a "mine-to-magnet" supply chain capable of supporting all U.S. defense requirements by 2027.
But that prognosis was made in a different pre-Trump admin world.
To what extent the current trade war, and further restrictions on crucial enabler materials/machinery could delay this self-sufficiency goal is an open question.
Weaponizing Interdependence: A Preview of Future Conflict
This is not the first time Beijing has played this card.
In 2010–2011, China blocked rare earth exports to Japan during a territorial dispute in the East China Sea.
The result was global panic, skyrocketing prices, and a scramble for diversification.
The difference now is scale and sophistication.
China has integrated rare earths into a broader economic statecraft toolkit.
It has learned how to inflict strategic pain without triggering full-scale retaliation.
And unlike 2011, today’s geopolitical landscape is far more volatile.
The U.S.-China confrontation is no longer latent: it is here and happening in real-time already..
Strategically Prudent U.S. Response Is No Longer A Given.
As with Trump’s tariffs, the U.S. faces a choice between strategic clarity and reactive policymaking.
What needs to happen:
Massive investment in rare earth processing and magnet manufacturing—especially in allied countries.
Strategic coordination among the U.S., EU, Japan, South Korea, and Australia to pool resources and avoid duplication.
(side note: although this will be easier said than done at a time where every allied nation is openly questioning U.S. commitments and the value of Trump’s promises - given that his attitude could change on a whim.)
Stockpile transparency and prioritization mechanisms that don’t privilege only the defense sector but also keep core industries functioning.
An end to the fantasy that market forces alone will resolve the problem.
Instead, what we may get is fragmented responses, underfunded pilot programs, and more talk of “friend-shoring” that never materializes.