Taiwan May Not Be the First Battlefield-The Rare Earth Supply Chain Already Is

Highlights

• China controls an estimated 85–90% of global rare earth separation capacity, underpinning Western defense systems from missiles to drones.
• Military strategists risk overlooking how economic coercion and critical mineral leverage can achieve strategic objectives without a single shot fired.
• The U.S. cannot sustain a prolonged defense buildup without secure access to dysprosium, terbium, samarium, and other heavy rare earths.
• Modern warfare depends on the ability to replace precision munitions and advanced systems—making industrial resilience as vital as battlefield superiority.
• For investors, the defining question of Great Powers Era 2.0 is who controls the industrial ecosystem, not just who fields the strongest military today.

Why a leading military strategist may be asking the wrong first question in the age of Great Powers Era 2.0™. Rare Earth Exchanges® Analysis: Former U.S. Pacific Commander Admiral Dennis Blair argues (opens in a new tab) in Foreign Affairs that fears of China's near-term military dominance over Taiwan are overstated. His central thesis is that technological change increasingly favors Taiwan and the United States, making an outright Chinese invasion less likely to succeed than many assume. That may prove correct.

But Rare Earth Exchanges believes the strategic conversation is incomplete. In what we call Great Powers Era 2.0™, military capability is only one pillar of national power. Industrial capacity, rare earth processing, magnet manufacturing, critical minerals supply chains, manufacturing resilience, and economic coercion increasingly shape geopolitical outcomes as much as fleets, missiles, and aircraft. The question for investors is no longer simply Who wins the battle? It is Who controls the factories that make victory possible?

The War May Begin Long Before the Shooting

Blair evaluates operational military capability. Rare Earth Exchanges asks what happens before the first missile is launched.

China is widely estimated to control roughly 85–90% of global rare earth separation capacity and the overwhelming majority of high-performance permanent magnet production. Those industrial capabilities underpin precision-guided munitions, electric propulsion, advanced radar, aerospace systems, robotics, semiconductors, and much of the defense industrial base. Military strength cannot be separated from industrial supply. True, the U.S. can revert to older magnet designs. This by itself would represent a dramatic setback on multiple counts beyond the scope of this piece.

The Questions Missing From the Debate

Blair's analysis is grounded in military operations. It pays comparatively little attention to industrial mobilization, strategic materials, and economic statecraft.

Yet these questions deserve equal scrutiny:

• What if Beijing never needs to invade Taiwan because economic leverage achieves many of its strategic objectives?
• Can the United States sustain a prolonged defense buildup if heavy rare earth exports (not to mention over a dozen other critical minerals) remain constrained?
• Who supplies the dysprosium, terbium, samarium, and yttrium required to replenish missile, aircraft, and drone production?
• Can Western defense manufacturing scale without secure access to magnets, metals, and separated rare earth oxides? Especially in this new evolving battlefield dominated by drones and soon robotics?
• Does battlefield superiority matter if industrial dependence remains with one's principal strategic competitor?

These are no longer hypothetical policy questions. They are investment questions.

Great Powers Era 2.0™ Changes the Equation

China has repeatedly demonstrated its willingness to use export licensing, industrial policy, and strategic resource management as instruments of national power. Whether one characterizes these actions as economic security policy or economic coercion, they illustrate that critical mineral supply chains have become strategic assets rather than ordinary commodity markets. This does not diminish Blair's military assessment.

It broadens it. Military superiority and industrial superiority are becoming inseparable. That’s the foundation of our Great Powers 2.0 thesis.

The Rare Earth Exchanges View

Blair's essay is thoughtful, disciplined, and persuasive within its military framework. Yet twenty-first century competition increasingly rewards nations that can sustain industrial production, replenish critical components, and secure strategic supply chains—not merely prevail in an initial engagement.

Recent conflicts, including the exchange of long-range strikes between Israel and Iran, underscore this reality. Modern warfare is not only about the sophistication of weapons; it is about the ability to replace them. Precision-guided munitions, air defense interceptors, drones, radar systems, and advanced aircraft all depend on complex industrial networks built on rare earth elements, permanent magnets, and other critical minerals.

For investors, that distinction is profound. The defining question of Great Powers Era 2.0™ is no longer simply which nation fields the most capable military today. It is which nation controls the industrial ecosystem capable of sustaining military, technological, and economic power over years—or even decades.

That contest is already underway. It is playing out in export controls, processing capacity, magnet production, and the race to build resilient supply chains outside China.

While public debate often focuses on aircraft carriers, missiles, and troop movements, the quieter struggle over rare earths and critical minerals may prove just as consequential. The factories, refineries, and processing plants that underpin modern defense deserve as much attention as the weapons they ultimately enable.

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