Rare Earths: U.S.-China Trade War’s Hidden Leverage

Have you ever stopped to think about what powers the tech in your pocket or the jets defending our skies? It’s not just silicon or steel—it’s a group of obscure minerals that most of us rarely consider. These rare earth elements, a collection of 17 metals tucked away in the periodic table, are the unsung heroes behind everything from your smartphone screen to advanced military hardware. Yet, as trade tensions between the U.S. and China escalate, these minerals have become a geopolitical flashpoint, exposing a vulnerability that could reshape global markets.

The Strategic Power of Rare Earths

Rare earths aren’t just another commodity; they’re the backbone of modern technology. From the magnets in electric vehicle motors to the lasers guiding precision weaponry, these materials are indispensable. But here’s the kicker: China controls roughly 80% of global rare earth production and nearly all of its refining. That’s a stranglehold that gives Beijing a trump card in trade negotiations, leaving the U.S. scrambling to catch up.

Rare earths are the hidden currency of modern innovation, and those who control them hold immense power.

– Industry analyst

The stakes couldn’t be higher. With trade talks looming, the U.S. finds itself in a precarious position, heavily reliant on a rival nation for materials critical to its economy and security. How did we get here? And what can be done to shift the balance?

Why Rare Earths Matter

Let’s break it down. Rare earth elements, like neodymium, dysprosium, and lanthanum, aren’t exactly rare in the ground—they’re just tough to extract and refine. They’re essential for:

• Consumer tech: Smartphones, tablets, and touchscreens rely on these minerals for their displays and speakers.
• Green energy: Wind turbines and solar panels use rare earth magnets to maximize efficiency.
• Defense: The F-35 fighter jet, a cornerstone of U.S. military power, requires massive amounts of rare earths for its advanced systems.
• Electric vehicles: The motors driving EVs depend on powerful magnets made from these materials.

Without a steady supply, entire industries grind to a halt. Imagine trying to build a smartphone without a touchscreen or an EV without a motor. That’s the kind of leverage China wields, and it’s not afraid to use it.

China’s Dominance in the Rare Earth Market

China didn’t just stumble into this position of power. Decades of investment in mining and refining have made it the global leader in rare earths. By some estimates, it controls 90% of the world’s rare earth refining capacity. This wasn’t an accident—it was a strategic move to dominate a critical supply chain.

In April 2025, China tightened its grip by imposing export controls on certain rare earths and magnets, sending shockwaves through global supply chains. Automotive suppliers, particularly those tied to major U.S. manufacturers, felt the pinch almost immediately. While some approvals for exports have trickled through, the message was clear: China can turn off the tap whenever it wants.

China’s control over rare earths is like holding the keys to the global tech kingdom.

Why does this matter for trade talks? Because every negotiation now happens under the shadow of this dependency. The U.S. can push for tariffs or manufacturing repatriation, but without access to these minerals, those efforts feel like rearranging deck chairs on the Titanic.

The U.S.’s Missed Opportunities

Here’s where it gets frustrating. The U.S. hasn’t always been this vulnerable. Back in the 1990s, domestic production of rare earths was robust, with facilities like the Mountain Pass mine in California leading the charge. But a combination of environmental regulations, market dynamics, and a lack of foresight led to a decline. By 2002, Mountain Pass suspended production, and the U.S. ceded ground to China.

Fast forward to today, and efforts to revive domestic production are underway but painfully slow. MP Materials, the current operator of Mountain Pass, is working to become a fully integrated producer of rare earth magnets. It’s a step in the right direction, but their output—about 15% of global consumption—is a drop in the bucket compared to China’s dominance.

I can’t help but wonder: why didn’t we see this coming? How did we let a single company, once tied to a risky SPAC deal, become the linchpin of our rare earth strategy? It’s like betting your entire poker hand on a single card.

The Geopolitical Chess Game

Trade talks between the U.S. and China are less about tariffs and more about leverage. China’s rare earth dominance gives it a queen on the board, while the U.S. is playing with pawns. Recent reports suggest that high-level discussions have touched on rare earth access, with assurances from Chinese leadership that supplies might continue—for now. But that’s a promise built on sand.

Consider the F-35 program. This cutting-edge fighter jet is a marvel of engineering, but it’s also a rare earth hog. Relying on China for these materials is like asking your opponent to supply your ammunition in a duel. It’s not just risky—it’s reckless.

The table above lays out the stakes. A disruption in rare earth supply doesn’t just hit one industry—it ripples across the economy, from consumer goods to national defense.

What Can the U.S. Do?

The good news? There’s a path forward, but it’s not easy. The U.S. needs to treat rare earths like a national priority, akin to the Manhattan Project that developed the atomic bomb. Here’s what that could look like:

1. Invest in domestic production: Pour billions into reviving mines like Mountain Pass and building new refining facilities.
2. Diversify supply chains: Partner with allies like Australia and Canada, which have untapped rare earth deposits.
3. Stockpile strategically: Create a national reserve of rare earths, similar to the Strategic Petroleum Reserve.
4. Incentivize innovation: Fund research into recycling rare earths and developing alternative materials.

These steps sound straightforward, but they require political will and long-term commitment. In my experience, governments tend to kick the can down the road until a crisis forces action. Let’s hope it doesn’t come to that.

The Role of Private Industry

While government action is critical, private companies have a role to play. MP Materials is a prime example, but it can’t do it alone. Other players, from startups to established miners, need to step up. There’s also the question of tech giants. Companies producing EVs and smartphones rely heavily on rare earths—shouldn’t they be investing in supply chain security?

Perhaps the most intriguing idea is a North American Rare Earth Pact. Mexico, with its own deposits, could be a game-changer. Imagine a regional alliance that reduces dependency on China while boosting economic ties. It’s a long shot, but stranger things have happened.

Collaboration across borders could be the key to breaking China’s rare earth monopoly.

– Supply chain expert

The Bigger Picture

At its core, this isn’t just about minerals—it’s about strategic foresight. The U.S. has spent decades chasing short-term gains, outsourcing critical supply chains to save a buck. Now, we’re paying the price. China’s dominance in rare earths is a wake-up call, a reminder that global markets are as much about power as they are about profit.

As trade talks unfold, the U.S. needs to play its cards carefully. Tariffs and sanctions are tools, but they’re blunt ones. A smarter approach would be to invest in self-sufficiency while building alliances to counterbalance China’s leverage. It’s a tall order, but the alternative—continued dependency—isn’t an option.

So, where does this leave us? On the eve of critical trade negotiations, the U.S. is at a disadvantage, but it’s not out of the game. The rare earth issue is a stark reminder of the stakes in global trade. If we’re serious about competing, we need to think bigger, act faster, and play smarter. The question is: are we ready to step up, or will we keep playing catch-up?