China’s rare earth pause gives US edge to challenge dominance
China’s commitment to postpone its latest restrictions on the export of rare earths, essential for numerous high-tech products, for one year as part of a trade agreement negotiated by President Donald Trump presents a significant opportunity for the US and its allies to enhance their own production and processing capabilities. However, it will be challenging to diminish China’s dominance in the market. The restrictions China imposed on rare earths this year have emerged as a pivotal topic in the trade discussions between Beijing and Washington. Trump reacted with anger to China’s recent regulations, threatening to impose an additional 100 percent tariff on all Chinese imports. However, he has since retracted that demand as part of this agreement. This week’s deal will postpone the regulations that mandated foreign companies to obtain special approval for exporting items containing even minimal traces of rare earth elements sourced from China, regardless of whether those products were manufactured elsewhere by foreign companies. However, it does not remove the restrictions that were implemented in the spring following Trump’s tariffs.
These essential minerals are required in a wide array of products, spanning from jet engines and radar systems to electric vehicles and robots, as well as consumer electronics such as laptops and phones. China is responsible for almost 70 percent of the global rare earths mining. It also oversees approximately 90 percent of the processing of global rare earths. Neha Mukherjee, a rare earths analyst at Benchmark Mineral Intelligence, stated that the one-year delay in China’s new rare earth export controls, announced earlier this month, offers some short-term relief that will enable exports to return to a more normal level. However, she emphasized that it does not alter the broader strategic landscape, highlighting the importance for America and its allies to persist in investing in the industry. “This move appears more tactical than structural, a pause to stabilize trade relations with the US rather than a policy reversal,” Mukherjee said. “This is a temporary window for the US and allies to accelerate diversification before controls likely return.”
The White House has prioritized the revival and expansion of the domestic critical minerals industry, while also pursuing supplies of these elements from allied nations. The Pentagon has committed to a $400 million investment in rare-earth producer MP Materials, pledging to guarantee the purchase of every magnet produced at its expansive new facility and establishing a minimum price for its neodymium and praseodymium products for the next ten years. The West is making progress. Ian Lange, an economics professor specializing in rare earths at the Colorado School of Mines, expressed his belief that the US and its allies can achieve substantial advancements within a year to reduce China’s control over the rare earths market. Several promising initiatives are currently in progress. Noveon will maintain its production of rare earth magnets at its facility in Texas, while MP Materials and USA Rare Earth are set to commence magnet production at their respective plants within the upcoming year. Beginning next year, MP intends to commence the processing of the heavy rare earths that China had restricted in the spring, at the sole operating US rare earths mine located in Mountain Pass, California. Lange stated that additional initiatives to recycle rare earths and initiate their production as byproducts at current steel and zirconium mines could soon yield positive results. The recent agreement between the United States and Australia will also assist in supplying additional materials to counter China. China has demonstrated minimal readiness to permit rare earth exports to defense contractors, raising concerns due to the implications for national security.
However, the military’s demand for rare earths is comparatively modest, suggesting that America could potentially meet its requirements by focusing on sourcing rare earths from alternative suppliers for applications in fighter jets, guided missiles, and nuclear submarines. Industry executives have asserted that this must be the Manhattan Project moment for rare earths if the United States is to ever break China’s hold on them. “We are entering overtime against China, and they presently hold possession on our 10-yard line. Our best defensive move is to tie together our global refining and supply partnerships with allies and swiftly invest in innovation in the United States,” said Wade Senti. Scott Dunn emphasized that the specifics of China’s implementation of this suspension will be crucial. With the agreement set for just one year, it is evident that the US must take advantage of this opportunity to bolster domestic capabilities and mitigate long-term geopolitical risks. Lange expressed optimism, noting that the United States is not beginning from scratch. He believes that if current efforts persist, America will be significantly improved in a year, even though some government investments may require several years to materialize. “In a year, their actions hold little significance for us. We maintain an independent supply chain. At least I don’t think we’re too far from that,” Lange said.
