Of all of the tools in China’s trade war arsenal, perhaps its most potent is its grip over rare earths, the materials that underpin technologies ranging from semiconductor chips to F-35 fighter jets.
China flexed that muscle last year after U.S. President Donald Trump unleashed sweeping tariffs on the country. Among other countermeasures, Beijing announced its own rare-earth export restrictions, setting the stage for multiple rounds of high-level negotiations and sharper escalations that ultimately culminated in a one-year trade truce that will expire in the fall.
Of all of the tools in China’s trade war arsenal, perhaps its most potent is its grip over rare earths, the materials that underpin technologies ranging from semiconductor chips to F-35 fighter jets.
China flexed that muscle last year after U.S. President Donald Trump unleashed sweeping tariffs on the country. Among other countermeasures, Beijing announced its own rare-earth export restrictions, setting the stage for multiple rounds of high-level negotiations and sharper escalations that ultimately culminated in a one-year trade truce that will expire in the fall.
It’s a powerful card that is certain to loom over Trump’s summit with Chinese President Xi Jinping later this week. Although the Trump administration has turbocharged U.S. efforts to diversify away from Chinese rare-earth supply chains, experts say that this big push hasn’t yet minimized Washington’s exposure to Beijing.
“The U.S. still has to tread carefully in its relationship with China to avoid those disruptions,” given how long it takes to transform rare-earth announcements, funding, and partnerships into actual supply and permanent magnets, said Gracelin Baskaran, the director of the critical minerals security program at the Center for Strategic and International Studies, a Washington-based think tank.
Despite their name, rare earths are not actually that rare. The materials, which are a grouping of 17 metallic elements found on a periodic table, can be found all over the world. The challenge is locating rare earths in commercially viable concentrations and then establishing the infrastructure and technology to mine and process them at scale.
The problem for the United States and much of the world is that China is the world’s rare-earths powerhouse, dominating around 85 percent of processing and more than 90 percent of magnet production. Beijing especially commands the separation of heavy rare earths, none of which currently occurs in the United States.
Given that grip over market supply, Beijing has long been able to drive global prices and throttle hopeful competitors. China has also proved to be increasingly willing to wield its supply chain leverage globally, having almost tripled its use of export restrictions between 2021 and 2025.
Washington’s rare-earth vulnerability has been thrown into sharp relief in recent months as the Trump administration has waged war against Iran, raising fears that the Defense Department is burning through munitions that are dependent on these very materials.
Replenishing U.S. munitions stockpiles will require heavy rare earths—exactly “where China holds a quasi-monopoly,” said Tom Moerenhout, who leads the Critical Materials Initiative at Columbia University’s Center on Global Energy Policy.
Against that backdrop, Beijing will likely be in the driver’s seat of trade talks. “They will play this again to their advantage in the trade negotiations,” Moerenhout said, “and to me, [there is] no doubt that they will also be very successful at it.”
The Trump administration has been waging a sweeping and swift campaign to strengthen U.S. supply chain security in critical minerals and rare earths, both at home and abroad. It has pumped billions of dollars into the sector; unveiled plans for a massive new critical minerals stockpile, called “Project Vault”; taken equity stakes in a raft of firms; inked dozens of mineral deals worldwide; and pitched a global minerals trading bloc.
In one of the more recent developments, the firm USA Rare Earth last month announced plans to acquire Brazil’s Serra Verde Group, which owns one of the few mines outside of China with a rich supply of heavy rare earths as well as a processing plant in the South American country.
“With the addition of Serra Verde to our portfolio, what the world now has outside of China is access to the critical minerals, the processing, metallization, and magnet-making that are going to be essential to energy production,” Barbara Humpton, the CEO of USA Rare Earth, told Foreign Policy last month.
(This week, Brazil’s antitrust watchdog launched an investigation into the proposed deal.)
Still, no matter how forceful the Trump administration’s push has been, it takes time to diversify away from Beijing. Even with Project Vault, for the foreseeable future, Washington will be sourcing Chinese materials to stockpile in the United States, said Chris Berry, the president of House Mountain Partners, an independent metals analysis consultancy.
“We’re still a long, long, long ways away before, I think, we can declare any kind of partial victory in terms of developing a homegrown supply chain,” he added.
As Washington looks ahead, Japan may offer important lessons. Long before Trump’s trade war, China had famously leveraged its rare-earth grip against Tokyo, with Beijing halting exports during a dispute in 2010. Alarmed, Japan raced to diversify its supply and slash its dependence on Beijing.
Yet even after a roughly 15-year push, Tokyo was still vulnerable to China’s rare-earth squeeze earlier this year. Japan is still the world’s biggest rare-earth importer, and as of 2024, Beijing still accounted for more than 60 percent of the country’s total rare-earth imports, according to a CSIS analysis.
“Japan in a way is a cautionary tale,” Baskaran said. “Since 2010, they have continuously worked to create that resilience and leverage strategic funding and offtake and partnerships—but at the same time, they still remain highly impacted by Chinese export controls.”
U.S. firms, for their part, are keeping their eyes on the ball.
“Our objective is: Build a strong value chain today that will grow into a thriving market over time, and as time goes on, the importance of the rare earths and permanent magnets in diplomatic negotiations will decrease,” Humpton said.
