Beijing: The escalating US-China trade war has taken a significant turn as Beijing recently enforced broad export restrictions on rare earth elements. These minerals are essential for the production of various technologies, including smartphones, wind turbines, and advanced military systems.
According to Anadolu Agency, these minerals, often referred to as the 'seeds of technology,' are crucial for the miniaturization of electronics and the development of green, medical, telecommunications, transportation, and defense technologies. China's current control over these resources places it at the center of a geopolitical race for technological supremacy.
The US Geological Survey's 2024 data reveals that China is responsible for 69% of the world's rare earth production and holds nearly half of the global reserves. Additionally, China dominates 90% of the refining capacity, which is the critical process of converting mined minerals into usable materials. This monopoly has prompted the US to intensify efforts to secure alternative sources of rare earths.
Despite support from the Inflation Reduction Act and the CHIPS Act, which has resulted in increased investment in domestic mining and government backing for companies like MP Materials and Lynas Rare Earths, experts emphasize that merely establishing new mines will not suffice to break China's stronghold.
The US's reliance on China for rare earths poses significant strategic risks, especially given China's dominance in reserves and processing capabilities. Energy strategist Umud Shokri, a senior visiting fellow at George Mason University, highlighted the national security implications of this dependency. He noted that while countries like the US and Australia have reopened mines, they still rely heavily on China for refining due to its cost-effective processing.
Shokri warned that any disruption in the rare earth supply chain could severely impact industries relying on these minerals, including the US defense sector, which uses them in crucial hardware like F-35 fighter jets and Tomahawk missiles. To mitigate this risk, projects like the Sheep Creek deposit in Montana are being considered, which could potentially satisfy 25-50% of US demand, although their completion timelines remain uncertain.
Recently, China restricted the export of seven rare earths, including samarium and dysprosium, used in both civilian and military applications. This move has halted exports as companies must now obtain licenses from China's Commerce Ministry, although the specifics of the approval process are still unknown. Additionally, China expanded its 'unreliable entity list' to include 16 US companies, adding further complications for US manufacturers dependent on Chinese rare earths.
Shokri also noted that the trade war between the US and China, intensified during US President Donald Trump's second term, is reshaping the global mining landscape. Tariffs imposed by both nations have disrupted supply chains and altered demand for critical commodities.
The US has been exploring new strategic mineral partnerships, most notably with Ukraine, which has substantial reserves of titanium and rare earth elements. A proposed $1 trillion mineral deal between the US and Ukraine involves a joint Reconstruction Investment Fund to boost US supply chains. However, the ongoing conflict with Russia and infrastructure damage in Ukraine pose challenges to this initiative.
Greenland, with the world's eighth-largest rare earth reserves, is another potential source. However, the confrontational tone from Trump towards Ukraine and Greenland may hinder efforts to establish new partnerships. Despite recent investments, the US remains years away from achieving a self-sufficient supply chain for rare earths.