U.S.–China Trade Salvos and the Rare Earth Frontline (May 31 – June 6 2025)

Mineral Warfare: How Rare Earths Are Shaping the U.S.–China Clash

China’s Rare Earth Dominance and April 2025 Export Controls

China has long commanded the rare earth elements (REE) industry, producing around 90% of the world’s rare earths and virtually all of the critical heavy rare earths needed for high-performance magnets. This dominance spans not just mining but the complex, dirty refining processes needed to turn ore into useful materials. In April 2025, Beijing moved to weaponize this dominance by imposing sweeping new export controls on REEs. China’s Ministry of Commerce announced that seven categories of medium and heavy rare earths – including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium – along with related alloys, compounds, and permanent magnets, would require special export licenses effective April 4. The official rationale cited protecting “national security” and fulfilling nonproliferation obligations, but strategically it was a direct response to new U.S. tariffs.

Rather than an outright ban, China’s controls force exporters to apply for licenses, giving Beijing discretion to throttle supply by limiting approvals. “China made that list strategically,” noted an American rare earth executive, underscoring that Beijing targeted heavy REEs crucial to U.S. industry and defense. The heavy rare earth focus is significant: until recently China accounted for 99% of global heavy REE processing capacity. By omitting light REEs (where Australia’s Lynas and others have some capacity), China concentrated its leverage on segments where alternatives are scarce. In fact, a single Brazilian project is the only heavy REE source outside China/Myanmar – and it ships its output to China for refining. The new licensing regime immediately chilled exports, with shipments of rare earth magnets reportedly halted at Chinese ports pending approvals. Analysts warned of immediate supply disruptions, price spikes potentially reaching 2× to 5× current levels, and a rush by companies to stockpile material.

Geopolitically, Beijing’s April 4 actions were viewed as an opening salvo in the escalating trade confrontation. By linking rare earths to national security, China signaled a willingness to “escalate” and leverage its chokehold on critical minerals in retaliation for U.S. measures. This tactic is not without precedent – China infamously banned rare earth exports to Japan in 2010 during a diplomatic spat. Over 2023–2025, Beijing also tightened exports of other strategic materials (gallium, germanium, graphite, tungsten, antimony) in tit-for-tat moves. The April 2025 curbs thus crystallized fears that critical minerals have become a trade war battleground, with China prepared to cut off the West from inputs vital to high-tech and defense industries.

Tariff Escalations Hit Critical Supply Chains

These Chinese export restrictions came as Washington ratcheted up tariffs on Chinese goods, creating a feedback loop of economic escalation. In early April, U.S. President Donald Trump hiked tariffs on most Chinese imports to 54% – a dramatic increase aimed at pressuring Beijing. China’s rare earth curbs were part of a “sweeping response” to these U.S. duties. Beijing also rolled out non-tariff countermeasures on April 4 and 9, including new antidumping probes, an antitrust investigation into DuPont’s China unit, and adding dozens of U.S. companies to an “Unreliable Entity” blacklist and export control list. The message was clear: China would answer tariffs in kind – by squeezing areas of supply chain dependency.

From steel and aluminum to critical minerals, these tit-for-tat measures are reshaping global supply chains. The U.S. had earlier imposed 25% Section 232 tariffs on imported steel and aluminum for national security reasons, and by 2025 those duties remained in force. In response, China had raised its own tariffs – for example, slapping a 125% import tariff on U.S. rare earth concentrate feedstock in April. That effectively shut down the flow of U.S.-mined rare earths to China, as selling into China under a 125% duty made no commercial sense. Las Vegas-based MP Materials, operator of the only U.S. rare earth mine, announced it halted all shipments to China after the tariff hike, cutting off a major revenue stream for the company. MP’s concentrate sales to its Chinese refining partner (Shenghe Resources) had accounted for over 70% of its revenue in 2024. “Selling our valuable critical materials under 125% tariffs is neither commercially rational nor aligned with America’s national interest,” MP Materials declared, emphasizing the strategic logic behind its decision.

For global manufacturers, the simultaneous U.S. tariff hikes and China’s mineral controls have been a double punch. Higher U.S. tariffs on steel, aluminum, and other inputs raise costs for industrial supply chains, while China’s curbs threaten actual shortages of key materials. By June 2025, alarm bells were ringing across industries from automotive to aerospace. Global automakers warned of production halts if Chinese rare earth magnets and alloys don’t resume flowing soon. German carmakers said the magnet shortage could “shut down production” and rattle their economies. An Indian electric vehicle maker likewise cautioned it may have to stop EV production in early June due to zero rare earth magnet supply, after Indian firms received no export licenses from China. In May, the Alliance for Automotive Innovation (representing GM, Toyota, VW, Hyundai and others) wrote to the Trump administration that without reliable access to REE magnets, suppliers cannot produce critical auto components – from motors and sensors to seat belts and power steering systems.

The result has been a frantic scramble for alternative suppliers and diplomatic intervention. Officials from Japan, Europe, and India rushed to Beijing seeking emergency talks and faster license approvals. A Japanese business delegation secured meetings with China’s Ministry of Commerce in early June, and European diplomats from major auto-producing nations requested urgent consultations. India is organizing a mission of auto executives to China, as its EV makers warn any further delay in magnets could be dire. Western and Asian manufacturers are also eyeing Japan and South Korea’s stockpiles as stop-gap sources, and even exploring recycling of rare earths from electronics. But such alternatives are limited in the near term. As one U.S. industry consultant remarked, “I don’t think anyone should be surprised…We have a production challenge and need a whole-of-government approach to secure resources. The time horizon to do this was yesterday.” In other words, the crisis is forcing a rapid rethink of supply chain resilience for critical minerals.

Dual-Use and Defense Supply Chains at Risk

Beyond economic fallout, these measures strike at dual-use and military supply chains in both countries. Rare earth elements are indispensable to modern weapons systems – a fact well understood by strategists in Beijing and Washington. The U.S. Department of Defense relies on REEs for a range of defense technologies: F-35 fighter jets contain over 900 pounds of rare earths; each Arleigh Burke-class destroyer requires some 5,200 pounds; a Virginia-class submarine uses around 9,200 pounds. Rare earth permanent magnets are critical for precision-guided munitions, lasers, radar, jet engines, and satellite systems. Thus China’s decision to halt exports of heavy REEs and high-performance magnets threatens to constrict the supply of components like actuators, guidance systems, and servomotors that U.S. defense contractors need. Two U.S. aerospace suppliers privately noted some inputs are sole-sourced from China – a point of acute vulnerability. The Pentagon does maintain strategic stockpiles of certain rare earth materials, but not nearly enough to sustain defense production long-term if Chinese supply remains throttled. Any protracted shortage could delay weapons manufacturing and erode military readiness, widening the gap as China rapidly builds up its own arsenal. Indeed, China is acquiring advanced weapons “five to six times faster” than the U.S. by some estimates, a pace that export bans on U.S. inputs will only accelerate in Beijing’s favor.

On the flip side, the U.S. is leveraging its own controls to hit China’s strategic sectors. In late May, in apparent response to the rare earth curbs, Washington suspended sales of certain critical technologies to China’s aerospace industry, including parts for state-owned aircraft maker COMAC. This move targets China’s ambitions to develop domestic passenger jets and military aircraft, depriving them of Western components. Similarly, U.S. export controls on semiconductors and chipmaking equipment – tightened over 2023–24 – have restricted China’s access to high-end chips crucial for both commercial and military applications. Thus, each side is wielding its dominance in different domains: China in raw materials and processing, the U.S. in high-tech components. The “dual-use” nature of many of these goods (usable in civilian or military systems) blurs economic and security lines. For example, China’s April export control announcement not only covered minerals but also placed 16 U.S. entities (mostly defense and aerospace firms) on an export blacklist, cutting them off from receiving Chinese dual-use goods. This suggests China may outright deny licenses to companies like Lockheed Martin or Raytheon, impeding their supply of specialty metals or electronics.

The immediate effect on China’s own military supply chain from U.S. tariffs is less direct, given China’s self-sufficiency in basic metals and its stockpiles of critical minerals. However, if the U.S. or allies restrict exports of aerospace-grade materials or components (as with COMAC’s case), it could slow China’s technological advances in aviation and space. Additionally, China’s curbs have a boomerang risk: by disrupting global industries, they could dampen demand and investment in technologies that Chinese companies also participate in (like electric vehicles and wind turbines). For now, Beijing seems willing to accept that risk as a price for strategic leverage. Chinese officials signaled some flexibility by late May – hinting at possible license relaxations for certain European and Chinese semiconductor firms after industries raised shortage concerns. A foreign ministry spokesperson insisted “we stand ready to strengthen dialogue…and maintain stability of global supply chains”. These statements suggest China wants to calibrate the pain, perhaps easing restrictions enough to avoid complete shutdowns of ally industries while keeping pressure on the U.S. and its closest partners.

Chinese Rare Earth Producers: Response and Risks

China’s domestic rare earth miners and processors are at the eye of the storm, yet many are buffered by state support and diversified markets. China Northern Rare Earth Group, the country’s largest rare earth producer (focused on light REEs like neodymium), continues to benefit from Beijing’s tight quota system that keeps rare earth output and prices in check. With export licenses now a political tool, leading firms may actually see surging domestic demand and higher prices as foreign customers scramble for non-Chinese supply or to relocate magnet manufacturing to China. Prices for some heavy rare earth oxides were already rising on speculation that Chinese exporters will get fewer licenses – analysts noted some materials could see price spikes of several hundred percent if the curbs persist. In the near term, Chinese REE companies can pivot sales to China’s own booming electric vehicle (EV) and renewables sectors, which will absorb supply that might have gone overseas. The national security framing of the export controls also implies these firms will receive government backing (low-cost loans, research funding) to ensure China’s own needs are met first.

A case in point is Shenghe Resources Holding Co., a major rare earth processor and trader. Shenghe was the buyer of MP Materials’ concentrate and holds a minority stake in MP. When MP halted shipments, Shenghe publicly stated the suspension of U.S. feedstock would not significantly impact its production, thanks to a “diversified supply channel” of raw materials. Shenghe sources ore from multiple domestic mines (e.g. in Sichuan) and imports monazite sand from places like Africa as alternative feedstock. The company noted its offtake contract with MP remains legally in place (it was renewed via a Singapore subsidiary in 2024), leaving the door open for future U.S. shipments if tariffs subside. Meanwhile, Shenghe is aggressively expanding abroad: in May it agreed to acquire Australia’s Peak Rare Earths for about A$150 million. Peak owns the Ngualla rare earth project in Tanzania, and Shenghe already held a 20% stake and rights to all of Ngualla’s concentrate. By buying Peak, Shenghe secures a new heavy rare earth source in Africa – a strategic hedge against Chinese domestic mining limits. The deal (at a 199% premium to Peak’s pre-offer price) underscores China’s willingness to invest heavily to lock down global rare earth assets. It awaits approval by regulators in Australia (which has been wary of Chinese takeovers in critical minerals) and Tanzania.

Chinese industry leaders thus appear to be managing the disruption. Their risk lies in potential long-term market loss if Western nations develop independent supply chains. But for now, companies like Shenghe and Northern Rare Earth enjoy a seller’s market and strong state support. Beijing’s policy signals – such as an April directive boosting state funding for strategic minerals exploration to bolster self-sufficiency – suggest domestic producers will be kept afloat. In fact, China’s export control law allows for export curbs to be adjusted or removed as leverage in negotiations, meaning Chinese firms could swiftly resume exports if a trade truce is reached. The partial 90-day suspension of some Chinese countermeasures (like unreliable-entity designations) after mid-May talks hints that rare earth licenses could similarly become a bargaining chip. For now, Chinese rare earth giants are aligning with government strategy: prioritizing Chinese consumers, fulfilling export orders only with explicit state blessing, and acquiring resources abroad to tighten their global grip.

Western Rare Earth Firms and Multinationals: Impact and Adaptation

Outside China, rare earth miners and processors have been hit with both challenges and opportunities from these shifts. MP Materials (NYSE: MP) saw its stock plunge over 10% on April 4 when China’s export curb news broke, and another 5% drop mid-April when it suspended shipments to China. Losing its Chinese offtake deal (over 70% of revenue) is a major blow to short-term earnings. Yet MP is rapidly pivoting: it now processes nearly half its mine output in California itself, producing refined oxides that it sells outside China. The company is stockpiling the remaining concentrate while it scales up its new separation facility. MP’s end-goal is an “end-to-end” domestic supply chain, from mining at Mountain Pass to a new magnet alloy factory in Texas, slated to produce 1,000 tons of neodymium-iron-boron magnets by end of 2025. That would still be <1% of China’s output, but it’s a start. MP’s CEO James Litinsky cast the situation in strategic terms, saying the Saudi partnership announced in May is a step toward “rebalancing the global supply chain…while deepening the strategic alliance between the U.S. and Saudi Arabia.” MP’s share price actually jumped ~5% on news of this Saudi MOU, as investors saw a path to new markets and funding.

Australia’s Lynas Rare Earths (ASX: LYC) – the largest REE producer outside China – has emerged as a critical player in this realignment. Lynas’s stock has been resilient, climbing strongly in 2025 amid rising rare earth prices and investor optimism. The company just achieved a major milestone: in May, Lynas produced its first batch of dysprosium – a heavy rare earth – at its Malaysia plant, making it the first company outside China to commercially produce heavy REEs. This was enabled by a new heavy REE separation circuit Lynas commissioned in late April. Dysprosium and terbium from Lynas provide Western and Japanese buyers with a non-Chinese source for the very materials Beijing has now restricted. “This on-spec dysprosium is a significant step for supply chain resilience,” remarked CEO Amanda Lacaze, noting Lynas is already engaging with customers in Japan, the U.S., and Europe who are eager to source heavies from outside China. Lynas still faces bottlenecks – it sends some intermediate products to China for final refining and is racing to complete a new processing plant in Australia to satisfy Malaysian regulators. For now, Australia remains dependent on Chinese refiners at least until 2026, even as it develops projects like Northern Minerals’ Browns Range (touted to be the first significant dysprosium mine outside China). But Lynas’s progress on heavy REEs is a bellwether for how allied countries can start closing the gap.

Several emerging North American players saw wild market swings as well. U.S.-listed rare earth startups like USA Rare Earth (building a magnet plant in Oklahoma) jumped +20% on China’s export control news – presumably on hopes that Western magnet orders would flock to them. But just weeks later, some juniors plunged: e.g. Canada’s Ucore Rare Metals fell 15% and NioCorp (developing a Nebraska project) collapsed 25% in mid-April trading. Such volatility reflects uncertainty over which projects will actually benefit from the crisis. Companies with near-term processing capability (like USA Rare Earth’s pilot line or Neo Performance Materials’ Estonian magnet factory) are viewed more favorably than those years from production. Phoenix Tailings, a Massachusetts startup that recycles rare earths from e-waste, announced it will “double down” on expansion plans to boost output. However, financing remains a hurdle – NioCorp, for instance, still needs $1+ billion to develop its mine and has struggled to secure funds. The U.S. government’s response (discussed below) in supporting these firms may determine which ones thrive.

For downstream multinationals in the tech, auto, and defense sectors, the impact is more indirect but no less significant. Tesla, Apple, and Lockheed Martin were cited among U.S. companies reliant on Chinese rare earths in their supply chains. Automakers like Toyota and Volkswagen are now urgently seeking alternative magnet sources or considering redesigns (Tesla, notably, had been engineering motors that use fewer or no heavy REEs). Defense contractors are quietly activating contingency plans – including drawing down stockpiled materials where possible and urging expedited qualification of new suppliers. One example: Boeing and Raytheon did not publicly comment on the situation, but industry sources noted that certain avionics components rely on Chinese-origin rare earth alloys. U.S. import data show 80%+ of America’s rare earth compounds and metals have come from China in recent years, so virtually every high-tech manufacturer is touched by these restrictions.

Market Reactions and Financial Outlook

Financial markets have been gyrating as this rare earth drama unfolds. Initially, Beijing’s April export control shocked investors, contributing to a spike in commodity prices and a dip in global equities. The sell-off in rare-earth-related stocks (MP Materials, etc.) contrasted with a rally in some Asian and Australian miners who are seen as potential winners. Lynas’s share price outperformed the ASX 200 index during the April turmoil, and by late May had risen roughly 30% since the start of the year. In contrast, Chinese rare earth stocks had a more muted reaction – investors expect Beijing will manage quotas to keep domestic firms profitable even if export volumes fall. China Northern Rare Earth’s A-shares have been relatively stable, with analysts maintaining “Buy” ratings and forecasting modest upside (the stock trades around CNY 23 with target ~CNY 26). This suggests markets believe China’s rare earth sector will retain pricing power despite trade friction.

Some of the biggest market moves have come from policy signals. When the White House and Beijing reached a tentative 90-day tariff de-escalation deal on May 12–14, it eased some investor fears. Under that truce, the U.S. suspended its planned 125% tariff escalation (reverting to 10% for now) and China agreed to pause certain non-tariff retaliation, pending further talks. Rare earth export licenses were not explicitly mentioned in the joint statement, but shortly after, reports emerged of a few export licenses quietly being granted – for example, to Volkswagen’s magnet suppliers in China. This news, plus China’s public stance about cooperating to avoid auto sector disruptions, buoyed sentiment for European automakers and eased the worst-case scenario of immediate factory shutdowns. German auto stocks regained some ground in early June once it appeared Beijing might relent enough to keep their assembly lines running.

Looking ahead, the risk outlook for companies remains two-fold. First is regulatory risk: the situation could worsen if talks falter in August and the U.S. snaps back its full tariffs while China halts rare earth exports entirely. Companies like MP or Lynas would then see surging demand (and prices) for non-Chinese supply, but downstream clients (EV and defense firms) might face production cuts – a lose-lose in the near term. Second is competitive risk: over the longer horizon, if Western governments succeed in jump-starting new rare earth projects, Chinese firms could eventually lose market share or face lower prices. However, any such shift is years away; as of 2025 the West’s capacity is still a drop in the bucket (e.g. MP’s future 1,000 tons of magnets vs. China’s 130,000+ tons output). The more immediate financial risk is to manufacturers’ margins – automakers and electronics producers may absorb higher input costs or expensive redesigns to reduce rare earth usage. Defense contractors could see program delays if critical components are unavailable, potentially triggering cost overruns that hit earnings. These uncertainties are now frequently cited in companies’ risk disclosures and earnings calls. For instance, General Motors’ CEO in May acknowledged the rare earth situation as “a new variable in our supply chain and cost structure for EVs,” and Lockheed Martin’s annual report added a note about reliance on strategic materials. Investors and analysts are closely tracking any government relief measures (such as subsidies or stockpile releases) that could mitigate these risks in coming quarters.

U.S. Strategic Response: National Security, Stockpiling & Reshoring

Washington has characterized the rare earth squeeze as a national security wake-up call, accelerating initiatives to reduce dependence on China. In late March 2025 – even before the April export controls – President Trump invoked the Defense Production Act (DPA) to spur domestic mining and processing of critical minerals including rare earths. Federal agencies were ordered to fast-track permits for new mines (identifying opportunities on federal lands) and to support processing facilities. A former mining executive was appointed to coordinate these efforts, and by April the Pentagon and Department of Energy were reviewing grant and loan programs to aid projects in the rare earth supply chain. This builds on several years of funding: since 2020 the DOD has poured over $430 million into rare earth and magnet supply chain projects. For example, MP Materials received $9.6M in 2020 to reopen its separation plant and an additional $35M in 2022 toward a heavy rare earth processing capability. Similarly, Lynas’s U.S. subsidiary won a $30.4M grant in 2021 for a light REE facility in Texas, and another $120M in 2022 to build a heavy REE separation plant. These projects – the first of their kind in the U.S. in decades – are underway, but officials admit it will take years to reach meaningful scale. Even when MP and Lynas’s new U.S. plants are operational, they will collectively handle only a fraction of U.S. needs.

In the interim, the Pentagon is considering boosting strategic stockpiles of key rare earth metals and alloys. The U.S. National Defense Stockpile currently holds limited quantities of certain oxides and magnets, but Congress is weighing emergency funds to acquire more dysprosium, terbium and yttrium – the heavy elements most at risk. Legislation has also been introduced to establish a rare earth reserve specifically for defense contractors, analogous to the Strategic Petroleum Reserve. The idea is to have a buffer to keep missile and aircraft production going through any short-term supply crunch. Furthermore, lawmakers are revisiting the REESA (Rare Earths Supply-chain Enhancement Act) which would offer tax credits for domestic rare earth magnet manufacturing – aligning with recommendations from a 2023 House Strategic Competition Committee report urging incentives for U.S. magnet production.

On the reshoring front, the U.S. is not going it alone. The administration has been actively forging partnerships with allies for a more secure supply chain. In addition to the high-profile Saudi deal (where $600 billion in Saudi investments will support U.S. industries including mining), the U.S. has ongoing critical mineral cooperation with Australia and Canada. Since 2019, a U.S.-Australia strategic minerals collaboration has helped fund expansions at Lynas and encouraged Australian juniors. The Quad alliance (U.S., Japan, India, Australia) has a working group on critical minerals sharing data and coordinating financing for projects. Japan – which faced its own rare earth scare in 2010 – has built up stockpiles and invested in Lynas and Vietnam’s rare earth capacity to supply its auto industry. India, though currently a victim of the curbs, has sizeable rare earth reserves and is being courted by U.S. and Japanese firms for joint development (as an alternative to Chinese investment).

Finally, the U.S. is leveraging diplomatic tools: pressing the issue at the World Trade Organization (arguing China’s restrictions may violate trade rules if not justified by true security needs), and including rare earth supply assurances in any future negotiations with Beijing. Notably, the brief Geneva trade agreement that paused some tariffs in May had an implicit understanding that China would “ease critical mineral export bans” – a point President Trump later accused China of slow-walking. U.S. officials have signaled that if China doesn’t honor such commitments, broader tech restrictions will intensify (hence the COMAC and potential other measures). In short, Washington is treating rare earth security as part of a larger “industrial strategy” to decouple in strategic areas, using defense spending, alliances, and if needed emergency powers to ensure the U.S. is not held hostage again.

BRICS+ and Geopolitical Realignments in Rare Earth Trade

China’s rare earth gambit is also reverberating across the Global South, spurring geopolitical realignments around critical minerals. The expanded BRICS bloc (Brazil, Russia, India, China, South Africa, plus new entrants) now collectively controls an overwhelming share of global rare earth reserves – by one estimate 72% of world REE resources. Chinese officials and partners have floated the idea of BRICS countries coordinating on mineral trade to ensure supply continuity and stable prices among themselves. For instance, Evgeny Petrov, head of Russia’s subsoil agency, noted in July that with new members, BRICS could vastly expand mutual trade in minerals and metals to support each other’s industries. This hints at a potential “critical minerals club” where major producers (China, Russia, Brazil, South Africa) preferentially supply friendly economies, perhaps even pricing in local currencies to bypass the U.S. dollar. Such an arrangement would mirror how OPEC+ coordinates on oil. In fact, a BRICS summit later in 2025 is expected to discuss rare earth and battery metal cooperation, elevating it to a topic of high-level diplomacy.

We are already seeing new alliances form. China has drawn closer to resource-rich countries in Africa and the Middle East: its Belt and Road investments include rare earth exploration in places like Burundi and Malawi. Saudi Arabia’s nuanced position is notable – while signing a mining deal with the U.S., Riyadh also maintains strong ties with China (its biggest oil customer) and has expressed interest in joining BRICS. It’s conceivable that Saudi’s nascent mining ambitions (including potential rare earth extraction from phosphate streams) could supply both Western and Eastern partners, effectively hedging bets. Russia, despite lacking a developed rare earth industry today, has huge untapped deposits in Siberia and is reportedly seeking Chinese technical help to develop them. Moscow even signaled willingness to collaborate with U.S. firms on rare earth projects in March, an overture that underscores how critical minerals cut across usual alliances (though U.S.-Russia partnerships are practically frozen due to geopolitics).

For countries like Brazil and South Africa, which have significant rare earth and battery metal deposits, the U.S.–China rift presents opportunities. They can attract investment from both sides as everyone looks to diversify sources. Brazil’s new heavy rare earth mine (Serra Verde) began shipping ore – tellingly, its output is currently sent to China for processing. But Brasilia could leverage Chinese restrictions to negotiate for a local processing facility or partner with Western firms to break that dependency. South Africa’s government has mused about using forums like BRICS to get better terms for its mineral exports. If BRICS+ solidifies as a bloc, we could see South-South deals where, say, Brazil supplies REEs to India’s EV industry, or China helps build refining capacity in Africa in exchange for ore offtake agreements.

On the other hand, the rare earth crunch is also prompting realignment among U.S. allies. Europe, Japan, and the Five Eyes countries are coordinating more on critical mineral strategy. For example, the EU just signed a critical minerals partnership with Canada and is funding research into REE recycling and substitution. Japan’s investment in Vietnam’s REE center (dating back to the 2010 embargo) is being reinvigorated, and Japan recently joined forces with Australia to fund Lynas’s expansion. “Friendshoring” is the buzzword – sourcing materials from politically allied nations to reduce risk. India, part of QUAD and BRICS, is somewhat caught in between: New Delhi is unhappy with China’s embargo (which forced it to consider plant shutdowns in June) and thus is likely to deepen critical mineral ties with the U.S./Australia (e.g. joint exploration projects in India’s northeast where rare earths occur).

In summary, the ripple effects of China’s rare earth curbs are redrawing trade maps. Control of critical minerals is becoming a key factor in international alignments – much like oil was in the 20th century. The BRICS coalition, accounting for roughly 72% of global REE reserves post-expansion, recognizes the leverage this confers. They may push for trading these resources in non-dollar currencies to chip away at U.S. financial hegemony. Conversely, the U.S. is rallying a coalition of tech-leading democracies to secure supply chains that bypass China. How these parallel efforts play out will shape not only markets but also the geostrategic balance in advanced technologies and defense.

Conclusion

The late-May tariff skirmish and rare earth export standoff have laid bare the precarious interdependence of the U.S. and China in critical supply chains. China’s April 2025 export controls on rare earths exposed a strategic vulnerability for the West – one decades in the making – while also underscoring Beijing’s willingness to inflict economic pain as a trade bargaining tool. The United States and its allies are responding with urgency: scrambling to keep factories running in the short term, and committing to strategic decoupling for the long term by investing in new mines, refineries, and stockpiles. In the interim, companies caught in the middle face higher costs and supply uncertainty, with defense contractors and EV makers alike forced to contemplate redesigns or production delays.

Still, there are signs that crisis can drive change. The prospect of real alternate supply chains is slowly emerging – from Lynas’s heavy rare earth output in Malaysia, to MP and Ma’aden’s vision for a new hub in Saudi Arabia, to research initiatives in Japan, Australia, and the U.S. that aim to crack China’s monopoly on processing know-how. Each incremental project chips away at China’s stranglehold, though scaling up will take years. In the meantime, diplomatic and economic pressures will continue. The next few months (leading up to the 90-day trade truce expiration in August) will be critical. If U.S.–China negotiations falter, we could see an even tighter choke on rare earth exports – a scenario that global markets are nervously gaming out. Alternatively, a compromise could involve China quietly resuming some exports (granting more licenses) in exchange for U.S. tariff relief, which would offer short-term reprieve while the longer-term decoupling efforts proceed in the background.

One lesson is clear: rare earth elements, though obscure to the public, have become strategic pieces on the grand chessboard. They tie into economic might, technological leadership, and military power. The events of late May 2025 have vividly demonstrated how a policy decision in Beijing – or Washington – can send shockwaves through supply chains from Detroit to Düsseldorf to New Delhi. The Chinese state media has mused that whoever controls rare earths could “choke” the manufacturing of high-tech weapons and gadgets. Conversely, Western analysts argue that reliable access to these minerals is “the new oil” in terms of securing the industries of the future. Both views are correct. As the U.S. bolsters its rare earth stockpiles and China tightens its grip on processing, the era of complacency over critical minerals is ending. The coming realignments – whether BRICS-centric or ally-centric – will redefine not just supply chains, but the very alliances and power structures that underpin the 21st-century global economy.

Sources: Official statements and trade data from China’s Ministry of Commerce; White House and USTR releases on tariff actions; Reuters news reporting on China’s rare earth export policy and global industry reactions; Center for Strategic and International Studies (CSIS) analysis of the April 2025 rare earth restrictions and defense implications; company statements and financial filings (MP Materials, Lynas) as cited in Reuters and mining industry reports; and market intelligence from financial press covering rare earth producers and consumers. All information is as of early June 2025.