China’s Rare Earth Dominance
China’s chokehold on rare earths, essential minerals for electronics, automotive, and defense systems, gave the country significant influence over the United States during recent tariff discussions in London. China controls about 60% of global rare earth production and almost 90% of the refinery, tightening its grip in April by imposing curbs on seven rare earth elements and permanent magnets.
Impact on the US
The curbs, in response to high tariffs on Chinese exports imposed by US President Donald Trump, exposed US weaknesses, as the country has no domestic refinery capacity. The resulting supply chain disruptions hit the American industry hard, with US automobile manufacturer Ford forced to scale back SUV production in Chicago due to a lack of rare earths. Auto parts suppliers APTIV and BORGWARNED are developing engines with minimal or no rare earth content to counteract supply restrictions.
Consequences of China’s Export Restrictions
A survey by the American Chamber of Commerce in China showed that 75% of US companies expect their rare earth stocks to be depleted within three months. US producers have asked Washington to negotiate an end to the restrictions. In London, China agreed to accelerate export license permits, although there is a significant deficit. It is unclear whether the deal includes access for US military suppliers who rely on these minerals for combat aircraft and rocket systems.
European Industry Also Affected
The United States is not the only country exposed to a rare earth shortage. The European Union relies on China for 98% of its rare earth magnets, required for car components, combat aircraft, and medical imaging devices. The European Association of Automotive Suppliers warned that China’s export restrictions have already caused significant disruptions, leading to the shutdown of several production lines and plants across Europe.
India’s Response
India, with the fifth-largest rare earth reserves, contributes less than 1% to global rare earth production due to a lack of refinery capacity. India is also dependent on Chinese exports, which are subject to restrictions. New Delhi has increased efforts to diversify its supply through business with the United States, Australia, and Central Asian nations, but progress has been slow.
G7 Response
G7 executives agreed to a strategy to anticipate critical rare earth deficiencies and respond to deliberate market disruptions like China’s. The plan includes diversification of production and supply. However, experts warn that access to rare earths will become more critical for the West as advanced technologies emerge.
Alternative Sources
Several countries are increasing rare earth production, including the United States, Australia, and Brazil. Greenland is also a potential source, with the US and EU signing cooperation agreements. The Tanbreez project in southern Greenland has been classified as a top project for rare earth, with an estimated 28.2 million tons of minerals.
China’s Continued Dominance
Until alternative rare earth sources significantly increase, China will continue to wield this critical resource as a powerful geopolitical weapon, keeping global industries and nations in check. Experts are skeptical that other countries will ever challenge China’s dominance due to its enormous cost advantage. As soon as China eases export controls, prices will decrease, and the supply situation will ease, making the issue of overreliance on China less pressing.
