August 13, 2025

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The Race to Break Beijing’s Chokehold on Rare Earth Elements

AP Photo/Rick Bowmer

Rare Earth Elements (REEs) are a significant pillar of the strategic competition between the United States and the People’s Republic of China (PRC). Rare earth elements comprise 17 metals that play a crucial role in the production of magnets used in many of today’s modern and emerging technologies, including smartphones, electric vehicle batteries, high-tech sensors, and missile systems. For decades, the PRC has maintained a dominant position in the mining and refining of rare earths. U.S. supply chain vulnerabilities related to rare earths came to the forefront during Washington and Beijing’s escalatory “trade war” in the spring, which included tit-for-tat measures, ranging from insurmountable tariffs to the PRC Ministry of Commerce imposing export restrictions on seven of the 17 rare earth elements. Preliminary deals were reached in May and June between the two largest economies, signaling a temporary truce, including Beijing easing export restrictions on rare earths. However, recent reports suggest that the dual-use export restrictions the PRC has imposed on rare earths have significantly impacted U.S. defense companies and drone manufacturers’ ability to source these critical materials — showcasing the chokehold Beijing exerts on a supply chain vital to U.S. national security.

For decades, the Chinese Communist Party (CCP) has cultivated a whole-of-government approach to securing PRC dominance in the supply chain of rare earths and other critical minerals, all in the name of national security. Since the 1990s, the PRC has dominated the market, accounting for approximately 70 percent of the global mining and nearly 90 percent of the separation and refining of REEs worldwide. The dominant approach involves multiple domestic actors — the CCP, state-owned enterprises, the military, and research institutions — as well as a sophisticated policy toolkit — including export controls, price controls, subsidies, tax incentives, and foreign investments. All of these tools are deployed to ensure that the PRC can maintain strategic control of REEs. Xi’s signature foreign policy, the Belt and Road Initiative (BRI), has also been instrumental in securing strategic partnerships and investing in mineral-rich countries to fortify the PRC’s dominant supply chain of REEs as well as other critical minerals used for modern technology, such as Lithium and Cobalt. According to AidData, nearly $57 billion in loans and grants have been distributed to 19 BRI participant countries across Asia, Africa, and Latin America — such as Kazakhstan, the Democratic Republic of Congo, and Peru — primarily for the so-called “upstream” (extraction operations) of copper, nickel, lithium, cobalt, and REEs.

This stands in sharp contrast to the U.S. government approach, which can be categorized as more short-term thinking and reliant on global market and free trade practices. The U.S. market-driven approach to industrial policy, coupled with a focus on return on investment and stringent environmental regulations surrounding mining and processing, gave the PRC the upper hand. It is also likely that the U.S. government underestimated the risk of strategic resource dependencies when it comes to REEs.

REEs are indispensable to a country's technological, economic, military, and energy security. The PRC’s dominance of the supply chain poses a strategic risk to the national security of the U.S. and allied countries. Beijing has historically weaponized the REEs supply chain to put political pressure on adversaries. For example, during a territorial dispute in 2010 between the PRC and Japan, Beijing imposed a two-month export ban on REEs, which had a significant impact on Japan's manufacturing industry. Apart from the economic and energy security risks inherent in the PRC weaponizing the REEs supply chain to choke off U.S. access, the current situation presents significant risks to military readiness. REEs are essential for high-performance magnets used in key aspects of U.S. defense infrastructure, including missile, satellite, and GPS systems, as well as fighter jets and submarines. Recent reports of PRC-imposed dual-use export restrictions on REEs impacting U.S. defense companies and manufacturers illustrate the serious vulnerability in U.S. defense posture that would only be exacerbated during a hypothetical conflict with the PRC. On July 28, a bilateral meeting took place in Stockholm, Sweden, aimed at negotiating a durable agreement ahead of the looming August 12 deadline. Only hours before the August 12 deadline, the Trump administration and the CCP announced a 90-day extension of the "truce" to continue negotiations, with the new deadline to reach an agreement set for November 10. However, such an extension is unlikely to alleviate the pressure on the U.S. defense sector to source REEs amid dwindling supplies. The PRC still retains the ability to slow down access when it deems strategically beneficial to do so.

While the U.S. seemingly has woken up to the dangerous reality of PRC supply chain dominance of REEs, a solution still appears years, if not decades, away. In 2024, guided by the National Defense Industrial Strategy, the Department of Defense outlined the goal of developing a complete “mine-to-magnet" supply chain for REEs to meet the country’s defense needs by 2027. And while investments have been made to this end (over $439 million since 2020 toward the domestic supply chain), structural issues still hinder the development of an independent supply chain in the foreseeable future. While the U.S. possesses REE deposits and resources, issues related to land ownership, environmental regulations, and years-long litigation processes make U.S. mine development lengthy and costly.

A recent report by S&P Global suggests that the timeline for U.S. mine development is the second longest in the world, averaging 29 years. And mining is only half (and the easier part) of the equation in the REE supply chain. Separation and refining are critical components to producing the magnets needed, and it is a highly lengthy, technically complex, and costly process to bring a REE processing plant online.

Taken together, despite recent efforts to bolster the domestic supply chain, the U.S. will likely continue to play catch-up for the foreseeable future. In the short term, Washington will likely turn to allies and partners to diversify its REE supply chain. Countries such as Australia, Saudi Arabia, Japan, and Vietnam have announced initiatives and investments in mining, processing, and magnet manufacturing. Potential REE deposits in Ukraine and the Nordic countries could provide the U.S. with alternative avenues; however, the reality of mining and processing in these regions could be decades away. Washington’s diplomatic and economic support for initiatives outside the U.S. will be crucial in diversifying the U.S. supply chain and ensuring the strategic independence of allies and partners, preventing them from becoming dependent upon the PRC. How well Washington succeeds in breaking Beijing’s chokehold on REEs could have a significant impact on the strategic competition between the U.S. and the PRC.