How China's Rare Earth Dominance Is Redefining Global Supply Chains and Tech Security

Table of Contents

Each F-35 fighter jet contains roughly 900 pounds of rare earth materials, while submarines can require more than 9,000 pounds, the U.S. Department of Defense has concluded a stark reminder of how deeply integrated these elements have become in the machinery of modern defense. As of June 2025, the rare earth global balance of power is once more in stark focus, with China’s export restrictions on seven major rare earth elements having a ripple effect through industries from defense to automotive production.

China’s dominance is more than a news headline: it is a structural fact. The nation exports roughly 70 percent of mined rare earths and processes almost 90 percent of the world’s supply, says the Center for Strategic and International Studies. It is not new, however, that the nation has a monopoly on this. Recent developments have, however, put its implication in sharper focus. In April, Beijing added export controls to seven rare earths samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium demanding special export licenses. These materials are not only essential for civilian technologies such as wind turbines and electric cars, but also for stealth planes, advanced radar, and missile guidance systems.

The direct trigger for the restrictions was the acceleration of the U.S.-China trade war, following the Trump administration’s increase of tariffs on Chinese imports. China’s retaliatory move, which also involved investment prohibitions on 17 American firms, highlighted the strategic advantage it enjoys. Even as a 90-day Geneva ceasefire briefly relaxed some restrictions, negotiations have since bogged down. President Trump accused China of renege on the agreement, while Beijing cited U.S. moves to increase controls on AI chips and student visas as violating consensus.

Their real-world implications have been immediate and extensive. European automakers reported considerable supply interruptions, and Japanese automaker Suzuki had to suspend production from a shortage of key components. Ford Motor also closed a Chicago factory temporarily after exhausting supplies of rare earth magnets, which are employed in dozens of electric motors across current cars, from power seats to steering systems, as indicated by The New York Times. The European Union and Japan have sent their negotiators to Washington in search of cooperation packages to win alternative supplies.

For defense and supply chain experts, the vulnerability is severe. The U.S. defense industrial base, already strained by capacity constraints, faces a situation where a total supply cutoff would drain strategic stockpiles within months. The Pentagon’s 2024 National Defense Industrial Base Strategy laid down a lofty objective: a completely domestic mine-to-magnet supply chain within five years, by 2027. Today, however, no heavy rare earth separation is taking place in the United States, and even the leading domestic projects still face several years before commercial scale. MP Materials’ Mountain Pass mine in California, the country’s sole major rare earth producer, has started producing samples of dysprosium oxide, but expansion to address national demands is a far-off hope.

The technical hurdles are steep. China’s lead is not just a matter of scale but of expertise, notably in solvent extraction processing, a technically demanding and environmentally delicate technique that Western firms have struggled to match. The CSIS notes that “China separates 99.9 percent of heavy rare earths,” a figure that highlights the depth of U.S. dependency. Attempts to diversify supply chains have seen the U.S. Department of Defense invest over $439 million since 2020 in domestic mining and processing, with additional funding directed to Lynas Rare Earths’ U.S. subsidiary for both light and heavy rare earth separation facilities.

Still, despite these investments, the U.S. will still only be able to make less than 1 percent of the neodymium-boron-iron magnets China produced in 2018 by the end of 2025. There is some hope from international partners: Australia’s Browns Range project hopes to be the first major dysprosium producer outside China, and Vietnam, home to close to 20 percent of all global reserves, is luring foreign investment to build out its processing capacity. Yet, to date, most outside Chinese producers still depend on China to do final refining.

Policy makers are resorting to a multi-pronged approach. The Defense Production Act has been employed to speed up domestic development, and tax credits and subsidies for rare earth magnet production are under consideration by Congress. The U.S. has also formed international partnerships, including the Minerals Security Partnership and bilateral arrangements with Japan, to secure alternative sources and encourage high environmental standards in mining and processing.

Recycling and technological advancement are increasingly considered to be key elements of supply chain resilience. To date, only around 5 percent of rare earths are recycled worldwide, but new technologies are being developed. The Department of Energy’s ReElement program is targeting 90 percent recovery levels from electric vehicle batteries by 2027, and Microsoft’s pilot project last year recovered 90 percent of the rare earths, gold, and copper from shredded electronics without the use of acids through dissolution recycling technology. Biotech firms are creating processes based on microbes that recover the rare earths from waste streams and provide both environmental and supply advantages.

Work on alternative materials, in the meantime, is picking up steam. Scientists at Cambridge University, for instance, have found a way to synthesize tetrataenite a potential iron-nickel alloy with magnetic strength akin to rare earth magnets using phosphorus to speed its creation, potentially eliminating the need for rare earths in the first place. Professor Lindsay Greer, the leader of the study, commented, “Between the environmental impacts, and the heavy reliance on China, there’s been an urgent search for alternative materials that do not require rare earths,” according to the Innovation News Network.

The economic interest is high. A six-month supply disruption in rare earth could push smartphone prices up to 25 percent and postpone electric vehicle output by eight months, based on industry estimates. For the energy transition, wind and solar project delays could jeopardize climate commitments, while medical imaging devices and advanced manufacturing would also experience sharp price hikes.

For policymakers, defense planners, and technology analysts, the crisis of the rare earths is not simply a supply chain problem it is a challenge to industrial strategy, technological innovation, and global cooperation. The next few years will prove whether or not the advanced economies of the world can create the strong, diversified supply chains necessary to ensure both security and prosperity in a period of strategic competition.