https://observer.co.uk/news/international/article/relying-on-china-for-essential-rare-earths-is-making-us-prisoners-of-a-codependent-war
International
Monday 2 June 2025
Relying on China for essential rare earths is making us prisoners of a codependent war
Beijing has an iron grip on minerals that are crucial to weapons manufacturing, but the west must find a way of breaking free of it
The term “new cold war” should be tossed on to the scrapheap. The intensifying geoeconomic competition between the US and China is so different from the cold war between the former Soviet Union and the US that drawing such parallels is unhelpful.
What we have now is a “codependent war”. The US and China – as well as Europe and China – are so economically interdependent that an all-out commercial “war” between them would create mutual impoverishment. This is very different from the cold war, when the iron curtain severely limited trade and investment between the Soviet Union and the west.
The dynamics of this codependent conflict are nowhere clearer than in the continuing panic over critical minerals. In April, responding to stiff tariffs announced by Washington, China imposed export restrictions on seven rare earths – minerals that are critical to the manufacture of key technologies.
The reason that this move is causing palpitations in western capitals is because China processes about 90% of the world’s rare earths, giving it an effective stranglehold over the west’s ability to produce many technologies that are essential for infrastructure and national defence.
To put it bluntly, if the US were cut off from importing the seven rare earths that Beijing restricted, it would not be able to make F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, Predator drones, smart bombs and other military equipment, according to a report by the Center for Strategic and International Studies (CSIS), a US thinktank.
If this happened, the defence of the UK – and by extension Nato – would be severely compromised because these weapons and other technologies – which also need critical minerals – form a crucial part of defensive shields. “China could cripple many industrial sectors in Europe and the US,” said Henry Sanderson, author of Volt Rush, about the politics and economics of critical minerals. “China has undeniable leverage in that it produces about 90% of rare earths.”
But in a codependent war, wounding the other side means you also wound yourself. China knows its biggest export market is the US and the EU its second largest. “Export controls are not a weapon that China really wants to use because … it doesn’t want to be an undependable supplier,” said Sanderson. “It wants to keep western markets open to its exports.”
So why, if mutually assured disruption is the likely outcome, did Beijing choose to threaten the trade equivalent of the nuclear option when it announced restrictions on rare earths in April? The answer, analysts said, is that it sensed the most effective way to pressure the White House is through a Pentagon already alarmed at the pace of China’s military buildup.
“China is rapidly expanding its munitions production and acquiring advanced weapons systems and equipment at a pace five to six times faster than the US,” according to the CSIS report by Gracelin Baskaran and Meredith Schwartz. “Further bans on critical minerals inputs will only widen the gap, enabling China to strengthen its military capabilities more quickly than the US.”
Indeed, such vulnerabilities were a factor in the White House’s decision to scale back the 145% “liberation day” tariffs imposed in April and subsequently institute a 90-day pause. But while this represents a short-term win for Beijing, over the longer term it is less certain that China will continue to get its way.
‘Export controls are not a weapon China really wants to use. It wants to keep western markets open’
The big takeaway from China’s rare earth restrictions – not just in Washington but in European capitals too – is that Beijing must not be allowed to hold the west to ransom over critical minerals, at least not indefinitely, analysts said. In other words, the west wants to break free of the codependency trap.
But this is much easier said than done. “There is bipartisan consensus in the US to reduce reliance on China but this will take over a decade and require a lot of money,” said Sanderson. “It is not just about digging more rare earth mines but also about building rare earths processing industries and supply chains.” Goldman Sachs has estimated it may cost as much as $30bn to replicate outside China a full supply chain of refined rare earths used in magnets for electric vehicle (EV) batteries. And EV batteries are just one of the many technologies that rare earths are required for.
There is much the west can learn from Japan. A dispute over a fishing trawler in 2010 prompted China to weaponise rare earths, restricting supplies to Japanese industry for two months. The shock was enough to trigger a thorough Japanese response that involved building processing plants and investing in strategic rare-earth mines in Australia and elsewhere.
After all these efforts, Japanese dependence on Chinese rare earths has dropped from 90% in 2010 to about 60% now. But such a significant level could still compromise Japan’s strategic room to manoeuvre in a scenario of geopolitical stress with China.
Europe and the UK are exposed to an extent that would allow Beijing to take its pound of flesh any time it chose. Ursula von der Leyen, president of the European Commission, raised the alarm in a speech in 2023. She spoke about the way in which soaring demand for critical minerals in Europe had left it reliant on China for 98% of its rare earths, 93% of its magnesium and 97% of its lithium.
The subsequent EU Critical Raw Materials Act, adopted in 2024, aims to achieve 40% of critical minerals processing within the EU by 2030. Although an improvement, it still falls far short of allowing Europe to escape its codependent bind with China.
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