Highlights

• China dominates 99% of U.S. refined rare earth metals processing.
• Makes supply chain independence nearly impossible through simple trade realignment.
• Non-Chinese producers can temporarily fill supply gaps.
• Ultimately, their output moves in sync with Chinese markets, demonstrating structural interdependence.
• Breaking free from Chinese rare earth dependence requires a comprehensive industrial strategy.
• Strategy involves domestic mining, refining, recycling, and manufacturing.

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A new study in the Journal of Government and Economics (Elsevier, Autumn 2025) throws cold water on Washington’s favorite illusion: that the U.S. can simply “diversify” its way out of rare earth dependence on China. Authored by Dr. Arsene Oka (opens in a new tab) of Howard University, the paper—“Diversification of rare earth metals supply chain: Can the U.S. rely on non-Chinese sources?”—dissects 30 years of trade data (1991–2023) to test whether America’s clean energy ambitions can run without Chinese metal. The answer: not for long.

Findings: Substitutes for a Season, Dependence for a Generation

Oka’s cointegration analysis reveals a striking paradox. Non-Chinese producers—Australia, Malaysia, and others—can temporarily fill supply gaps when Chinese prices spike. But over time, their output and China’s move in sync. When prices rise in one market, imports from both fall, a sign of structural complementarity. In other words, China and the rest of the world don’t compete—they co-exist in America’s supply chain.

China’s unmatched refining power, integrated processing, and dominance in heavy rare earths make it the backbone of global production. Even when the U.S. pivots to allies, higher costs and capacity limits drive trade flows right back to Beijing. As of 2023, China supplied roughly 99% of U.S. refined rare earth metals—a monopoly no other strategic resource comes close to matching.

The Author: China Supply Chain Dependence Not Easily Eliminated

Implications: The Myth of “Friendly” Independence

The message to policymakers is unsparing: friend-shoring without refining is a shell game. Sourcing from “friendly” nations may look like diversification on paper, but Oka’s data suggest it merely reshuffles dependence rather than eliminating it.

The study argues the only path to genuine resilience is industrial strategy, not import substitution. That means building a full-spectrum domestic ecosystem—from mining and refining to recycling and magnet manufacturing. Without it, U.S. supply security remains hostage to the same physics and price structures that empower China.

This echoes warnings from DOE analysts and prior studies by Lee & Dacass (2022) and Xu et al. (2024): the bottleneck isn’t geology, it’s processing—and China owns it.

Limitations: What the Model Can’t See

Oka’s model captures long-run trade behavior but not future shocks—such as technological breakthroughs, new African deposits, or the Inflation Reduction Act’s ripple effects. Nor does it assess potential material substitutions, such as ferrite or manganese-based magnets, that could reduce rare earth dependency. Still, the study’s cross-price elasticity estimates mark the first empirical proof that Chinese and non-Chinese supplies are economically bound—a warning shot for any policymaker who believes the U.S. can decouple by decree.

Conclusion: Running on a Chinese Treadmill

The verdict is clear: China is not just a supplier—it’s the system. Breaking free will take more than trade realignment; it demands patient capital, long-term policy consistency, and industrial-scale ambition. Until then, America’s clean-energy revolution runs on Chinese metals, refined in Chinese plants, priced in Chinese markets.

Citation: Oka, A. (2025). Diversification of rare earth metals supply chain: Can the U.S. rely on non-Chinese sources? Journal of Government and Economics, 19, 100156. https://doi.org/10.1016/j.jge.2025.100156 (opens in a new tab)

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