President Trump and his team recently secured a “fast track” deal regarding China’s rare earth exports. This has, at least for now, helped avert production delays and work stoppages among some major Western automakers. As a result, tens of thousands of American workers and their families are looking forward to a better July 4th holiday.
However, there are concerning indications that heavy rare earth elements like dysprosium and terbium, crucial for precision-guided missiles, jet fighter technology, and radar systems, are being tightly controlled by China’s new export licensing system. Reports suggest that the Chinese military is actively involved in identifying and restricting these elements within this new framework.
Having worked in the rare earth industry for nearly three decades, I’ve seen firsthand China’s strategies to maintain its dominance. It’s not surprising that the Chinese military would want to complicate matters for us. By designating heavy rare earths for “dual-use” technologies—those that can be employed for both civilian and military purposes—they can either delay or deny export licenses, claiming they’re complying with the law.
This situation arises at a time when allies, including the US Department of Defense and Israel, need to replenish their stock of smart bombs, missiles, and air defense systems. Each guided missile depends on a permanent magnet made from these heavy rare earths. If inventory runs low and these materials become inaccessible, the whole weapons supply chain could grind to a halt.
China is poised to directly constrain US military operations. Without a steady supply of these critical elements, the Pentagon may find itself unable to replenish its arsenal over time.
This isn’t just a distant threat. Remarkably, China supplies over 99% of the world’s isolated dysprosium and terbium, both essential for high-temperature permanent magnets used in advanced defense systems. These materials are not interchangeable, and no proven, scalable alternatives can meet the performance standards required by platforms like the F-35 and Aegis destroyers.
Some in Washington seem to think the private sector can bridge this gap, but that’s an oversimplification. Very few civil magnet manufacturers operate under the stringent specifications necessary for defense applications and often rely on Chinese raw materials. Even the most advanced rare earth companies in the West end up shipping some materials to China for processing. Beijing is aware of this dynamic and has intentionally created distinct trade routes for “civil” and “military” needs, tightening control over the latter.
It’s essential for Washington to reconsider its assumption that economic interdependence will protect US defense supply chains. Clearly, China appears unwilling to let its economic power go unused. Rare earths have transcended mere trade items—they have become geopolitical leverage.
So, what steps should the US take?
President Trump recognizes that a comprehensive, government-wide strategy is vital in establishing a fully domestic supply chain for heavy rare earth elements and the magnets made from them. This involves identifying and funding authorized projects capable of starting the extraction and processing of these materials in the US soon.
The stark reality is that there is currently only one fully permitted Greenfield project in the US equipped to handle rare earth segregation. With a timely loan, it’s possible to begin producing heavy rare earths like dysprosium and terbium within 36 months. For full transparency, I lead a company working on the Elk Creek Critical Mineral Project in Nebraska.
The point is that we need at least 12 similar projects to come online in the US as quickly as possible. Only then can we hope to gain some degree of independence from China regarding these crucial defense materials.
President Trump seems to grasp the strategic significance of these rare earths more than his predecessors. That’s why he’s taking proactive measures now. The Department of Defense is already funding magnet production via the Defense Production Act. Investment has been allocated for integrated mining and processing facilities, including the Elk Creek Project. It looks like Congress will be poised to inject billions into domestic mineral production and establish forward purchase agreements for these essential materials.
A new presidential memorandum just issued promotes innovative approaches, notably creating a unified application system for federal funding opportunities and a single access point for applicants to engage with multiple funding streams. This will streamline federal funding efforts, facilitating faster and more strategic investment in the energy and mineral sectors.
The US used to lead globally in rare earth production, and it can do so again. But time is running out. China’s intent is clear: it won’t permit the flow of these strategic materials to US defense contractors without imposing stringent conditions. As tensions rise over issues like Taiwan, AI technology, and naval operations in the Pacific, it’s likely China will leverage its position repeatedly.
