China's rare earth dominance: A strategic challenge for the West

The trade conflict between the United States and China is intensifying. The cycle of tariffs is escalating the economic standoff between the two powers. Beijing is responding reciprocally, matching American tariffs with equivalent rates. For semiconductor-related restrictions, China has limited the export of essential raw materials.

China holds a powerful position with exports of rare earth metals and their refinement. It is uncertain how far they are willing to go. This conflict is escalating. The question is to what extent the U.S. is prepared to respond if Beijing employs more drastic measures, as noted by Filip Rudnik, an analyst at the Centre for Eastern Studies.

Deng Xiaoping, a significant Chinese politician of the 1990s, stated that just as the Middle East has its oil, China has rare earth elements (REE). China has dominated the refinement and now controls the market. With increasing restrictions imposed by the American government on trade with China, Beijing is responding by tightening control over the export of elements like gallium and germanium, as well as critical minerals like tungsten. On April 10, seven more rare earth-based product types were added to the previous list, including samarium, gadolinium, and terbium. This list could expand to include other rare earth metals, such as tantalum, used in the production of electrolytic capacitors.

China has also imposed restrictions on neodymium and praseodymium, both of which are crucial for making magnets. These magnets, sourced from rare earths, are stronger and more valuable, playing a vital role in the production of electric vehicles.

As Maciej Kalwasiński from OSW reminded us in early April, while raw materials can be sourced globally, China has developed the industrial capacity for their processing, from which the United States has benefited for years.

Documented production in China (latest data from 2023) was 240,000 metric tonnes. The United States was second, with 43,000 metric tonnes, followed by Myanmar with 38,000 metric tonnes, and Australia with 18,000 metric tonnes. As a result, China holds 87 percent of the world's refining capacity.

About 90 percent of rare earth magnets are produced in China, and 99.9 percent of the world's dysprosium, which chip manufacturer Nvidia uses in capacitors, is extracted in China, according to The New York Times.

The Critical Raw Materials Alliance (CRMA) report states that China accounts for 80 percent of the world's gallium production and 60 percent of germanium.

The gap between the United States and China is vast. According to statistics from early January, China has 44 million metric tonnes of mineable rare earth metals. Following China, Vietnam has 22 million metric tonnes, and Brazil has 21 million metric tonnes. The United States has access to 1.8 million metric tonnes.

Further restricting the export of critical raw materials, on which the United States heavily depends, such as graphite or rare earth metals crucial for the defence industry and green technologies, is a tool of pressure, as noted by Dominik Kopiński from PIE in early April.

China sensed the economic opportunity earlier. Notably, the NYT recalled that in the 1980s, the United States was a leader in producing rare earth elements, accounting for nearly a third of the global market.

Today, only one significant rare earth element mine operates in the United States, located at Mountain Pass in California, which extracts about 15 percent of the world's rare earth resources.

Smaller operations are involved in extracting bastnaesite, a fluoro-carbonate mineral from the rare earth elements group, at the Mountain Pass mine in California. "Monazite was stored as a separate concentrate or included as an associated mineral in heavy sands concentrates in the southeastern United States. Mixed rare earth compounds were also produced in the United States. The estimated value of rare earth compounds and metals imported by the United States in 2024 was $170 million, an 11 percent decrease compared to $186 million in 2023," according to the Mineral Commodity Summaries 2025 (USGS) publication.

For years, the United States has relied on imports of rare earth compounds and metals. Seventy percent of the imports come from China, 13 percent from Malaysia, 6 percent from Japan, and 5 percent from Estonia. Other sources combined account for 6 percent.

Their importance to the American economy is substantial, as they are used in producing many goods, from standard LED lights to photovoltaic panels to electric car engines, as well as chips powering AI servers and smartphones, components for drones, cruise missiles, and fighter jets.

In case of a complete halt in the supply of strong magnets from rare earth metals, the heart of the American automotive industry, particularly Detroit, would suffer. There would be a shortage of chemicals for producing jet engines, lasers, car headlights, spark plugs or capacitors.

Some American companies have been stockpiling rare earth elements for years in anticipation of a trade war, but it is unclear how long these reserves will last if China halts its exports, according to the NYT.

- The competition for access to rare earths has become a crucial element of politics. Trump is well aware of how important it is to become independent of China and gain control over valuable resources, notes Filip Rudnik.

This is why Trump is eager to sign an agreement with Ukraine. On Thursday, the United States and Ukraine signed a letter of intent regarding an agreement to exploit Ukrainian mineral deposits.

Ukraine's lithium deposits rank among the largest in Europe, estimated at 500,000 metric tonnes. Lithium is essential for producing batteries for electric vehicles, among other uses. There are also deposits of manganese, nickel, and cobalt in these areas.

Besides Ukraine, other regions are being considered by the Trump administration as potential zones for American mining activity. The Americans see a similar role for Greenland's lands.

The problem could be the Greenlanders themselves, who might not want to become a United States colony or a giant mine of valuable deposits, adds Rudnik.

Moscow has also seized the opportunity. Putin offers Donald Trump resources, including rare earth minerals and shares in aluminum projects in the Arctic, trying to outdo Ukraine's offer.

- Russia is closely observing the confrontation between the United States and China. They are ready to take action. They will attempt to exploit the situation if China engages more forcefully with the United States. Then they will offer Trump even more. This was the mission of Kirill Dmitriev in Washington. They will lead America by the nose, tempting it with resources and business opportunities, an OSW analyst emphasizes.

However, according to Rudnik, this would be akin to buying a "pig in a poke." - The Russians know well what they have. They can precisely determine resources. The problem is that deposits are far from export corridors; starting such projects would be very costly and time-consuming. It would be a long-term investment without a certainty of return. Additionally, Russian rare earth metals are estimated at 10 million metric tonnes, representing 2 percent of global resources. Moreover, Russia lacks the refining capability that China possesses. Despite the rapprochement with Moscow, they do not share technology, summarizes Rudnik.