https://www.thinkchina.sg/politics/rare-earth-reality-check-limit-trumps-trade-gambit
The rare earth reality check: A limit to Trump’s trade gambit
16 Jun 2025
Politics By Hao Nan - Research fellow, Charhar Institute
The importance of rare earths in advanced manufacturing and China’s dominance of the market ensures that China can keep playing the rare earth card, says academic Hao Nan. But China still needs to think about how best to capitalise on this powerful leverage while managing the precision targeting of its export controls.
On 6 June, a day after a phone call between Chinese President Xi Jinping and US President Donald Trump, the latter confidently claimed that China had consented to resume exports of rare earth minerals and magnets to the US. The world, and especially the technology and manufacturing industry, listened with bated breath. But just a few days later, the reality was far more complex.
The two sides met up on 9-10 June in London for the second round of US-China negotiations with rare earths, technologies and tariffs dominating the agenda. Coming away with a “framework”, officials took the discussions back to their leaders. Once again, Trump swiftly declared a done deal on Truth Social, but the underlying dynamics suggest the US remains heavily dependent on Chinese rare earths, with no quick substitutes in sight.
... the two sides’ leverages are in fact intertwined, as all those US technologies need a stable supply of rare earth minerals and magnets.
China’s cautious counter-attack paying off
With the rare earth card in hand, China has probably found an even more fatal chokehold on the US, compared to the latter’s stranglehold on commercial jet engines, semiconductors and certain chemicals and machinery. And the two sides’ leverages are in fact intertwined, as all those US technologies need a stable supply of rare earth minerals and magnets.
Yet China’s approach has been far more cautious. Only when faced with escalating provocation — such as Trump’s sweeping tariffs announced in April — did Beijing finally deploy its rare earth card. Unlike America’s blunt sanctions that are clearly in violation of basic international trade arrangements, China’s measures echo the strategic logic of past embargo systems like COCOM and the Wassenaar Arrangement, citing the sensitive military-civilian dual-use nature of the rare earth minerals and magnets and the intentional obligation of non-proliferation.
In both the US and Chinese versions of the Geneva US-China negotiation press release, the US committed to a modification and removal of tariffs, while China, apart from making a similar commitment on tariff modification, only promised to “adopt all necessary administrative measures to suspend or remove the non-tariff countermeasures taken against the US since April 2, 2025”, which includes export controls on rare earth minerals launched on 4 April. While this aligns with the earlier citation of military-civilian dual-use concerns and non-proliferation obligation, it demonstrates China’s precautions in dealing with the second Trump administration, namely reserving policy leverages contingent on the Trump administration’s follow-ups.
A F-35 engine, avionics, munitions and radar use over 400kg rare earth elements; Virginia-class submarines and Arleigh Burke-class destroyers of the US Navy have 4,200kg and 2,360kg of rare earths in their systems.
The criticality of rare earths
Rare earths have proved critical to advanced manufacturing, from cars and semiconductors to robotics, medical imaging, wind turbines and military hardware. Rare earth magnets in particular, though small, are two to seven times or even 15 times stronger than conventional magnets and are essential for electric and fuel-powered vehicles, drones, fighter jets, and even Musk’s humanoid robot, Optimus, which requires over 2-4kg of Neodymium magnet per unit.
High-temperature stability of these magnets is crucial for modern engines and military applications. A F-35 engine, avionics, munitions and radar use over 400kg rare earth elements; Virginia-class submarines and Arleigh Burke-class destroyers of the US Navy have 4,200kg and 2,360kg of rare earths in their systems.
RAND Corporation warns that even a 90-day disruption could force 78% of US defence contractors to halt production. Most importantly, by March 2023, the National Defense Stockpile contained only US$1.3 billion in total assets, including US$912.3 million of stockpiled material, far less than the Cold War era’s US$42 billion in 1952. US companies typically only have 40-60 days of stockpile, which can be depleted quickly. All these make the supply chain resilience a critical national security issue to the US.
... even when rare earths are mined outside China, they often end up there for processing. The only US rare earth mine, Mountain Pass in California, ships 80% of its output to China.
China’s dominance of the rare earths market
China dominates this market of rare earths at every stage. According to the International Energy Agency, China by 2023 controlled 61% of global rare earth mining and a staggering 92% of processing capacity. The US Geological Survey reports that between 2020 and 2023, 70% of US rare earth imports came from China. Ironically, even when rare earths are mined outside China, they often end up there for processing. The only US rare earth mine, Mountain Pass in California, ships 80% of its output to China. Japanese and European firms also rely heavily on Chinese refiners.
After China imposed export controls on seven types of medium and heavy rare earths in April — key ingredients in auto, military and aerospace technologies, Beijing in May further formed an all-chain management and control taskforce involving ten ministries and seven provinces, relevant to the mining, refining, processing and transportation, manufacturing, sales and export of the rare earths.
As a result, prices for dysprosium oxide, terbium oxide surged sharply. Automakers have sounded the alarm, with American, Indian, Japanese, German and other major companies urging their governments to negotiate rare earth access. Ford’s Chicago plant shut down temporarily due to a shortage of rare earths. The European Association of Automotive Suppliers warned of imminent production stoppages, underscoring the global impact of the supply squeeze.
When China imposed new export controls in April, it was not just retaliation — it was a strategic reminder that “Made in America” dreams must reckon with complex global realities.
China’s decades of strategic investment
China’s dominance is no accident. It reflects decades of strategic investment and policy. In 1992, Deng Xiaoping famously declared, “The Middle East has oil, China has rare earths.” During the 2010 China-Japan territorial dispute, China briefly embargoed rare earths, prompting many global manufacturers to relocate production to China — a move that further entrenched Chinese control.
Trump’s trade war has reignited these dynamics. When China imposed new export controls in April, it was not just retaliation — it was a strategic reminder that “Made in America” dreams must reckon with complex global realities. Reports suggest that some automakers even now considered moving parts of their supply chains to China to sidestep the controls.
Past efforts to develop rare earth alternatives offer sobering lessons. After the 2010 embargo, Japan sought to stockpile rare earths and invested in Australia’s Lynas Corp. Yet Japanese firms ultimately maintained significant production in China to remain cost-competitive. American efforts have faced even steeper challenges. Mountain Pass Mine, once the world’s leading source, shut down in 1998 after environmental violations. Though revived under MP Materials, it still depends on Chinese processing. The MP Materials is not an isolated case. By and large, US production remains in its infancy.
According to the Center for Strategic and International Studies, since 2020, the Department of Defense has made various rounds of investment in different projects to secure the domestic heavy rare earths separation, and aimed in its 2024 National Defense Industrial Strategy, to develop a complete mine-to-magnet REE supply chain that can meet all US defense needs by 2027. Nevertheless, even a US$10 billion domestic supply chain — RAND’s estimate of the investment required — would take a decade to fully establish.
Attempts to diversify supply are geopolitically fraught. The US has eyed Greenland and Ukraine, both rich in rare earths, but logistical, environmental and political hurdles abound.
The US is caught with few options
Alternatively, the US has been resorting to recycling, diversifying and increasing investment at home, but all would take time and require stable industrial policy. In terms of recycling, the US Department of Energy’s ReElement programme aims to recover 90% of rare earths from EV batteries by 2025, but results so far are limited. Meanwhile, new domestic projects like Texas’s Round Top mine, though hosting 15 of the 17 rare earth elements, all accessible through above-ground, remain years from significant output.
Attempts to diversify supply are geopolitically fraught. The US has eyed Greenland and Ukraine, both rich in rare earths, but logistical, environmental and political hurdles abound. Even if mined, refining remains the Achilles’ heel— a sector where China’s expertise and economies of scale are unrivalled. The US has also been increasing its investment. The FY2025 US defence budget allocates US$1.2 billion for strategic reserves and US$350 million for domestic development.
... the path to true supply chain resilience is long, costly and uncertain. Until then, Beijing’s leverage will remain intact, and America’s vision of independent high-tech manufacturing will remain elusive.
Ultimately, America’s struggle to “reshore” rare earth production exposes a deeper manufacturing paradox: decades of chasing low costs abroad have hollowed out domestic capacity. Trump may tout rare earth access as a negotiating win or sign an executive order to stockpile deep-sea metals to enhance self-sufficiency, but the broader truth is clear: the path to true supply chain resilience is long, costly and uncertain. Until then, Beijing’s leverage will remain intact, and America’s vision of independent high-tech manufacturing will remain elusive.
Nevertheless, for Beijing, questions arise over how best to capitalise on this powerful leverage while carefully managing the precision targeting of its export controls. Though this leverage can counter US pressure and potentially prompt Washington to ease technological restrictions, Beijing has little interest in causing collateral damage to key third parties — such as the EU, Japan, South Korea and more broadly the global south — whose stances remain crucial in its broader and long-term rivalry with the US.
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