China tightens grip on rare earths as US scrambles for supply

The trade war between the USA and China is intensifying. The cycle of tariffs is escalating the economic conflict between these powers. Beijing is responding tit-for-tat, matching American tariffs with equivalent rates. In response to restrictions related to semiconductors, it has restricted the export of key raw materials.

China has a powerful arsenal in the form of exports of rare earth metals and their refinement. It is unclear how much further they are willing to go. This conflict is escalating, but the question is how far the American administration will push and whether the U.S. has the resolve should Beijing resort to more drastic measures, as noted by Filip Rudnik, an analyst at the Center for Eastern Studies.

Deng Xiaoping, a prominent Chinese politician from the 1990s, famously stated that just as the Middle East has its oil, China has rare earth elements (REE). China dominates the refining process and now controls the market. With increasing restrictions imposed by the American administration on trade with China, Beijing is responding by progressively controlling the export of elements such as gallium and germanium, as well as vital minerals like tungsten. On April 10, seven more rare earth-based product types were added to the previous list, including samarium, gadolinium, and terbium. This list could expand to include other rare earth metals, such as tantalum, used in the production of electrolytic capacitors.

China has also imposed restrictions on neodymium and praseodymium, primarily used to make magnets. Magnets derived from rare earths are much stronger and more valuable, and their application is crucial for producing electric vehicles.

As Maciej Kalwasiński from OSW noted in early April, although raw materials can be sourced from various places around the world, it is China that has developed an industrial base for their processing, which the USA has been utilizing for years.

Documented production in China (latest data from 2023) was 240,000 metric tons. The USA ranked second with 43,000 metric tons, followed by Myanmar with 38,000 metric tons, and Australia with 18,000 metric tons. Consequently, China holds 87 percent of the world's refining capacity.

Around 90 percent of rare earth magnets are produced in China, and 99.9 percent of the world's dysprosium, used by chip manufacturer Nvidia to create capacitors, is extracted in China, according to The New York Times.

As highlighted in the Critical Raw Materials Alliance (CRMA) report, China accounts for 80 percent of the world's gallium production and 60 percent of germanium.

The gap between the USA and China is considerable. Statistics from early January indicate that China has 44 million metric tons of mineable rare earth metals. Following China, Vietnam has 22 million metric tons, and Brazil has 21 million metric tons. The United States has access to 1.8 million metric tons.

The tool of pressure is further restricting the export of critical raw materials on which the USA heavily relies, such as graphite or rare earth metals crucial for the defense industry and green technologies, as noted by Dominik Kopiński from PIE in early April.

China has recognized the economic opportunity better than its counterparts. Notably, as the "NYT" reminds us, back in the 1980s, the USA was the leader in the production of rare earth elements, holding nearly a third of the global market.

Today, only one large rare earth element mine operates in the USA, located at Mountain Pass in California, which extracts about 15 percent of the world's rare earth resources.

Smaller operations include obtaining bastnaesite, a fluoro-carbonate mineral from the rare earth elements group, at the Mountain Pass mine in California. "Monazite was stored as a separate concentrate or included as an associated mineral in heavy sands concentrates in the southeastern United States. Mixed rare earth compounds were also produced in the western United States. The estimated value of rare earth compounds and metals imported by the USA in 2024 was $170 million, which is an 11 percent decrease compared to $186 million in 2023," according to the Mineral Commodity Summaries 2025 (USGS).

The USA has relied on imports of rare earth compounds and metals for years. Seventy percent of these imports come from China, 13 percent from Malaysia, 6 percent from Japan, and 5 percent from Estonia. Other sources combined account for 6 percent.

Their importance to the American economy is significant, as they are used in the production of many goods, including popular LED lights, photovoltaic panels, electric car engines, and chips powering AI servers and smartphones, as well as components for drones, cruise missiles, and fighter jets.

In the event of a complete stoppage of strong magnets made from rare earth metals, the heart of the USA's automotive industry, specifically Detroit, would suffer particularly. There would be a shortage of chemicals for producing jet engines, lasers, car headlights, and some spark plugs, or capacitors.

The New York Times reports that certain American companies have been accumulating rare earth elements for years in preparation for a potential trade conflict. However, there is uncertainty about how long these stockpiles would suffice if China were to suspend exports.

The competition for access to rare earths has become a crucial element of politics. Trump is well aware of the importance of becoming independent of China and gaining control over valuable resources, notes Filip Rudnik.

That's why Trump is eager to sign an agreement with Ukraine. On Thursday, the US and Ukraine signed a letter of intent concerning a deal for the US to exploit Ukrainian mineral deposits.

Ukraine's lithium deposits are among the largest in Europe, estimated at 500,000 metric tons. Lithium is essential for producing batteries for electric vehicles, among others. There are also deposits of manganese, nickel, and cobalt in these areas.

Besides Ukraine, other regions are also under consideration by the Trump administration as potential zones for American mining activity. The U.S. also sees strategic opportunities in Greenland's lands.

The problem could be the Greenlanders themselves, who might not want to become a U.S. colony and a vast mine of valuable deposits, adds Rudnik.

Moscow has also seized the opportunity. Putin offers Donald Trump resources, including rare earth resources or shares in aluminum and projects in the Arctic, trying to outdo Ukraine's offer.

Russia is closely watching the USA's confrontation with China. They are ready to take action, trying to exploit the situation if China fully confronts the USA. Their offers are part of this strategy, as emphasized by the OSW analyst.

However, according to Rudnik, this could be like buying a "pig in a poke." Russia understands its resources well and can determine them precisely. The problem lies in deposits being far from export corridors; initiating such projects would be very costly and time-consuming. It would be a distant investment with uncertain returns. Moreover, Russian rare earth metals are estimated at 10 million metric tons, representing 2 percent of global resources. Additionally, Russia lacks the refining capability that China has. Despite closer ties with Moscow, they do not share the necessary technology, concludes Rudnik.