Highlights
- China dominates over 70% of rare earth extraction and 85% of processing, creating a critical global supply chain vulnerability for Western nations.
- The U.S. and its allies face significant challenges in breaking China’s monopoly due to:
- Lost technical expertise
- Environmental regulations
- Massive reinvestment requirements
- Geopolitical tensions escalate as China weaponizes rare earth control, potentially disrupting industries from electric vehicles to advanced military technology.
For decades, the United States and its allies have grappled with a hard reality: the world’s supply of rare earth elements, essential to everything from advanced military technology to consumer electronics, is effectively monopolized by China. This dominance, carefully built over decades, did not happen by accident. It was enabled by short-sighted Western policy decisions, environmental concerns, and a lack of strategic foresight. Now, with the geopolitical stakes higher than ever, the U.S. is struggling to reclaim control over this critical supply chain—but it may already be too late.
From Industrial Necessity to Strategic Weapon
Rare earth elements (REEs) are not as “rare” as their name suggests, but they are difficult and environmentally hazardous to extract and process. The 15 lanthanide elements, along with scandium and yttrium, form the backbone of modern technology. They are indispensable for semiconductors, batteries, wind turbines, medical imaging devices, and nearly every piece of advanced military hardware.
China’s grip on rare earths tightened in the late 20th century when Western countries, particularly the United States, began offshoring environmentally sensitive industries. Throughout the 1980s and 1990s, U.S. policymakers, driven by deregulation and cost-cutting incentives, allowed domestic rare earth production to collapse. The Mountain Pass mine in California—once the world’s leading rare earth producer—ceased operations in 2002 after environmental violations, effectively ceding control to China.
Beijing, recognizing the strategic value of rare earths, moved aggressively to dominate the sector. By offering massive government subsidies, imposing export controls, and leveraging cheap labor, China systematically outcompeted and absorbed global rare earth production. Today, China accounts for more than 70% of the world’s REE extraction and over 85% of rare earth refining and processing.
The West’s Failed Wake-Up Calls
The first major sign that China would use rare earths as a geopolitical weapon came in 2010 when a maritime dispute between China and Japan over the Senkaku Islands led Beijing to impose an informal embargo on REE exports to Japan. The move sent shockwaves through global supply chains. Prices for critical materials skyrocketed, and Japan scrambled to diversify its sources. The United States, European Union, and other industrial powers belatedly realized the risks of their overreliance on China.
Despite this wake-up call, little changed. By 2012, the World Trade Organization (WTO) ruled against China’s restrictive rare earth export quotas, but Beijing had already achieved its strategic objective: reinforcing global dependence on its supply chain. The crisis passed, and the West returned to business as usual, importing refined rare earth from China rather than investing in domestic capacity.
China’s Chokehold Tightens
Fast forward to today, and China’s rare earth monopoly is stronger than ever. Even as the U.S. attempts to reshore production, the reality remains grim: refining and processing rare earths require expertise that has atrophied in the West. American companies lack the technical knowledge and infrastructure to refine REEs at a scale that would threaten China’s dominance. Decades of Western disengagement from the rare earth industry have allowed China to establish itself as the gatekeeper of advanced materials.
Meanwhile, Beijing continues to weaponize its control over REEs. In response to recent U.S. tariffs and export restrictions on Chinese technology, China has retaliated by imposing limits on the export of gallium and germanium—two elements critical to semiconductor production. The message is clear: if Western nations push China too far, Beijing can retaliate with devastating consequences for high-tech industries worldwide.
Can the U.S. Break Free?
The Biden administration, like its predecessors, has pledged to reduce dependence on China’s rare earths. Congress has passed legislation to fund domestic mining and processing projects, and alliances with Australia, Canada, and Japan aim to create alternative supply chains. However, these efforts face steep challenges.
First, rebuilding a domestic rare earth industry will take years, if not decades as Rare Earth Exchanges has repeatedly reported. Remember, mining is only the first step—processing, refining, and integrating REEs into complex supply chains require enormous investments and technological expertise. Second, China has a near-monopoly not just on raw materials but also on patents, processing techniques, and skilled labor. Simply put, even if the U.S. mined its own rare earths, it would still need to send them to China for refinement.
Furthermore, the environmental and regulatory landscape in the U.S. presents additional obstacles. Rare earth extraction generates radioactive waste, making new mining projects politically and environmentally contentious. Unlike China, where the government can suppress environmental concerns, Western nations face legal and political pushback that slows development.
Rare Earth War? Not Likely, As USA Way Behind
Despite all the rhetoric and policy initiatives coming out of the Biden administration, now the tough chatter is on steroids with Trump, but it does not really matter. China’s grip on rare earths remains unchallenged. The U.S. and its allies face a fundamental dilemma: they need rare earths to sustain their technological edge, but China controls the global supply chain. This dynamic places Western nations in a position of economic and military vulnerability.
If Beijing were to impose a full-scale export ban on refined rare earths tomorrow, entire industries in the West—ranging from electric vehicles to missile guidance systems—would grind to a halt. That is the stark reality of China’s rare earth monopoly. The U.S. can talk about energy independence and reshoring manufacturing, but as long as China controls the critical materials that power modern technology, it holds a decisive strategic advantage, and there is not much POTUS can do in the short run other than try to do with China and consider an industrial policy (which is highly unlikely).
So now the West faces a moment of reckoning: either make massive, immediate investments to rebuild domestic rare earth supply chains (resilience in the supply chain would take a decade) or remain indefinitely at Beijing’s mercy. The clock is ticking, and China’s grip only seems to get stronger.
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