In response to tariffs imposed by the U.S. under Donald Trump, China responded in part by implementing export controls on various rare earth elements. These critical materials are essential for the U.S., as they are vital for producing weapons, computer chips, and electric vehicles. China dominates the production of these rare earth materials, and experts believe it will take the U.S. several years to establish its own supply chain.
As trade tensions between the U.S. and China escalate, rare earths have become a significant point of leverage for China. While China may not want to completely cut off the U.S. from these resources, primarily due to the revenue generated from exports, Lyle Trytten, a critical minerals expert, warns that further restrictions could have severe repercussions across numerous industries. He states that the U.S. lacks the capacity to produce the materials necessary for its essential devices.
Rare earth’s importance
The importance of rare earths has grown over time due to the world’s increasing dependence on powerful computers and the pursuit of cleaner energy sources. For example, dysprosium and terbium are components of smartphone speakers. Neodymium is used to power electric vehicle motors. Tungsten, a very hard metal, is used in ammunition, semiconductor chips, and alloys found in jet engines and deep-drilling equipment.
China mines and processes almost all of these materials, having invested heavily in building the necessary infrastructure for decades. Consequently, many companies, including Tesla and Apple, source their rare earths from China. China has recently been willing to use this dominance as a geopolitical tool. In 2010, China restricted rare earth exports to Japan during a period of heightened tensions. In the last couple of years, Beijing has placed restrictions on other essential minerals, including gallium, germanium, and graphite.
According to an engineer at RAND, it is now predictable that China will use this approach as its “chosen weapon” in response to U.S. actions, such as export controls on specific technologies or tariffs. He notes that China’s dominance in separating heavy rare earths from light rare earths creates a vulnerability in the supply chain.
The White House acknowledged the fragility of the current system when it excluded critical minerals from its tariff regime this month. However, this did not prevent China from imposing export controls on seven types of rare earth elements to all countries on Friday. While not a ban, this decision gives Beijing control over access to these elements. China asserts that its export controls will not affect the rare earth supply chain.
Notably, China excluded several key rare earth elements, including neodymium and praseodymium. However, the controls demonstrate China’s willingness to use these materials as a bargaining tool and its potential to escalate restrictions if tensions increase. Trytten describes this as an “opening shot.” The listed elements also include those used in microchips for AI, highlighting the ongoing competition between the two countries.
Villalobos anticipates a short-term slowdown in rare earth exports as companies apply for licenses to comply with the export controls. He expects a temporary dip in exports followed by an increase as more companies obtain their licenses.
Villalobos warns that a greater threat to U.S. companies could emerge once China begins collecting detailed information about the rare earth market, which could then allow China to impose damaging sanctions on specific companies. This could affect U.S. defense companies like Lockheed Martin, which relies on rare earths for missile systems and fighter jets. He explains that the more information China gathers from exporters, the more easily it can target specific companies that it wants to restrict access to rare earths.
U.S. capacity
Many experts have long advocated for the U.S. to reduce its dependence on China for rare earths. Some believe that mining rare earths domestically is the solution. Other entrepreneurs have initiated projects to build mines and processing facilities across the U.S. Trump’s tariffs could incentivize these shifts, pushing American companies to enhance supply chain resilience. Villalobos suggests that this may spur investments, which are a significant obstacle to diversifying critical mineral supply chains.
However, Trytten notes that rare earths and other minerals are extremely complex to process, and the U.S. lacks the necessary infrastructure to rapidly scale up these efforts. The number of graduates from U.S. mining engineering programs has steadily declined in recent decades, potentially leading to a shortage of expertise. Trytten cautions against rushing new mining projects into production, stating that historically, fast-tracked projects in the metal industry tend to be poorly executed.
Because of these factors, Trytten argues that even if a new wave of mining projects begins now, they will not yield significant results until after Trump leaves office. He estimates that it will take eight to ten years to establish significant new capacity for many of these raw materials and questions whether Trump can withstand the challenges for that long.
Other experts argue that certain aspects of Trump’s tariffs hinder their ability to expand infrastructure within the U.S. On the Rare Earth Exchanges, Daniel O’Connor stated that tariffed materials like steel and aluminum are essential for mining and processing, urging against tariffs on materials needed to build infrastructure.
Rare earths in Greenland?
Some have speculated that rare earths are a key factor in Donald Trump’s interest in Greenland. Tech leaders such as Bill Gates and Jeff Bezos have invested in companies exploring for rare earths there. However, extracting resources from Greenland presents significant challenges. Trytten points out that Greenland has limited domestic energy production, and similar resources can be found in many other locations, making the Arctic region a less desirable mining location.
Regardless of the viability of Greenland, many U.S. companies are now compelled to seek non-Chinese rare earth options, even if it takes years to develop them. Villalobos emphasizes that almost every automated device relies on some type of rare earth magnet. He warns that any company that manufactures these devices, whether in the U.S., Japan, or any country outside of China, will feel the impact of these restrictions and could potentially become targets for sanctions in the future.
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