Highlights
- China’s export restrictions on seven critical rare earth elements threaten U.S. defense and technology industries by controlling 99% of global heavy rare earth element (REE) refining.
- The U.S. currently lacks commercial-scale heavy rare earth separation capabilities, leaving critical industries vulnerable to geopolitical leverage.
- Recovery from China’s rare earth monopoly will require more than subsidies and diplomacy, demanding urgent strategic investment and development.
In a newly published paper (opens in a new tab) from the Center for Strategic and International Studies (opens in a new tab) (CSIS), authors Gracelin Baskaran and Meredith Schwartz assess the escalating consequences of China’s April 4, 2025, export restrictions on seven critical rare earth elements (REEs). The paper, titled “The Consequences of China’s New Rare Earths Export Restrictions”, accurately outlines key supply chain vulnerabilities but underplays the deeper industrial fragilities and geopolitical leverage Beijing continues to wield.
Well-Documented Risks, Limited Strategic Prescriptions
The CSIS authors provide a solid overview of the stakes. By restricting exports of heavy rare earths—including dysprosium, terbium, and gadolinium—China has hit U.S. and allied vulnerabilities with surgical precision. These materials are core to the production of NdFeB magnets, indispensable for everything from F-35 fighter jets to wind turbines and EV motors. Notably, CSIS correctly states that the United States currently performs no commercial-scale heavy REE separation, leaving the Pentagon’s defense-industrial ambitions hobbled at a moment of acute geopolitical risk.
The paper also highlights the licensing mechanism China has implemented—rather than a blanket export ban—which creates strategic ambiguity. The risk is real: these licenses may serve as levers for future coercion, incentivizing foreign firms to comply with Chinese interests or risk being cut off. The authors rightly underscore that China controls 99% of global heavy REE refining capacity, a figure that has only tightened as rival facilities (e.g., in Vietnam) have shuttered due to taxation disputes.
What CSIS Gets Right—and What It Misses
The CSIS report effectively communicates the defense implications of the restrictions, noting that one Virginia-class submarine contains over 9,000 pounds of rare earths. However, while the analysis of DOD funding efforts is factual—including $439 million invested since 2020—it is overly deferential to the current pace of U.S. buildout and insufficiently critical of bureaucratic inertia, environmental permitting delays, and Wall Street’s chronic underinvestment in REE refining.
Moreover, the report lacks a serious interrogation of China’s techno-industrial dominance. China’s advantage is not just about volume—it includes proprietary know-how, industrial discipline, and decades of coordinated state-private sector development in solvent extraction, metallurgy, and magnet fabrication. This expertise cannot be easily replicated by U.S. contractors operating under short-term procurement cycles and diffuse leadership.
While the authors mention international cooperation—citing Australia, Japan, and Vietnam—they underestimate how far these partner nations are from meaningful independence. Even Lynas Rare Earths, touted as a Western champion, continues to send intermediate materials to China for final processing. Real independence remains aspirational through at least 2026, if not beyond.
Subtle Signals of CSIS Positioning
As expected from CSIS, a private Washington think tank offering consulting services to government and industry, the report is noncommittal in its policy prescriptions. It frames U.S. shortcomings as temporary and emphasizes continued investment and R&D partnerships—both accurate but also consistent with a sales pitch for sustained engagement with CSIS and its Critical Minerals Security Program. The report avoids recommending hard trade policy tools such as tariff retaliation, strategic stockpiling mandates, or WTO action.
This restraint is strategic. CSIS positions itself as a neutral expert, but its soft language around China’s industrial strategies—such as describing export controls as “incentivizing cooperation”—glosses over the coercive intent behind Beijing’s long-running rare earth dominance.
A Strong Summary, But a Soft Touch on the Hard Realities
CSIS delivers a concise and credible primer on the national security risks posed by China’s rare earth restrictions. The paper is well-sourced and technically sound, but its tone lacks urgency, and its strategic vision is clouded by institutional moderation. The threat is not just the pause in shipments or licensing delays—it’s that the United States and its allies have allowed Beijing to engineer a monopoly with geopolitical teeth, and recovery will take more than subsidies or polite diplomacy.
For U.S. policymakers, defense contractors, and critical mineral investors, the question now isn’t if the next supply squeeze will come—it’s how fast the West can build, fund, and defend the rare earth value chain before the window closes. Enter the founding of Rare Earth Exchanges, and it’s vision and strategic roadmap to facilitate this process.
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