The US has a genuine opportunity to end its troubling reliance on the People’s Republic of China (PRC) for rare earth elements, but industry experts argue that decisive action is necessary.
Rare earth elements comprise a group of 17 metals that are vital for manufacturing everything from vehicles and weapon systems to wind turbines, smartphones, and medical devices. Even with their commercial and strategic significance, the US gets about 80% of its rare earth supplies from China, which dominates the global market, handling around 92% of purification.
“This isn’t something the US can’t fix; it’s more like we haven’t made it a priority,” said Derex Scissors, a senior economist at the American Enterprise Institute and chief economist at China Beige Book, in a conversation with the Daily Caller News Foundation.
The dangers of depending on China for such critical resources were highlighted in April when Beijing enacted new export controls on certain rare earth elements. This move was seen as a response to tariffs imposed during President Donald Trump’s administration, which caused significant supply chain issues. (Related: Trump administration twists Chinese arm with fentanyl)
Some companies are feeling the pinch. Ford had to halt production at its Chicago plant in May due to rare earth shortages. Even after China indicated it would ease export controls following trade negotiations, there are reports that license approvals are still bogged down in red tape.
If recent trends serve as a guide, Beijing seems willing to use its control over rare earth materials not just for economic leverage but also as a means of exerting military pressure. A notable instance was in 2010 when China stopped rare earth shipments to Japan amid tensions over the Senkaku Islands, raising alarms about future uses of such leverage.
A 2023 report from the House Selection Committee on the Chinese Communist Party (CCP) cautioned that access to crucial minerals could be restricted in the event of conflict over Taiwan, pressing Congress to mitigate reliance on the PRC.
“If the US loses access to these critical minerals, it could severely hamper our commercial and defense manufacturing capabilities,” the April Presidential Order from Trump noted, instructing the Secretary of Commerce to review potential new tariffs on essential minerals.
However, progress in establishing a reliable rare earth supply chain domestically has been disappointingly slow. Experts like Myers and Scissors point out that merely focusing on trade negotiations with China doesn’t tackle deeper systemic issues. China’s strategy appears designed to undercut competitors while enforcing stringent environmental regulations that stifle rare earth initiatives.
Myers commented, “Ultimately, it doesn’t matter if China imposes trade restrictions long-term. They’re willing to box out competitors, exposing companies to significant risks.” (Related: China has a pentagon on a barrel, but Trump can stop it)
The Chinese government has been flooding the global market with affordable rare earth elements for years, covering financial losses to eliminate emerging competition. In 2021, it further consolidated major producers into a state-owned entity to better control production and pricing.
“This is how China has historically dominated the space and waged economic warfare,” Myers explained. The unpredictable pricing created by Chinese practices deters investors and makes it challenging for US companies to secure funding. He advocates for improved pricing transparency for rare earth minerals, proposing a pricing model akin to the one used in the automotive sector.
Additionally, Scissors believes the US should take considerable domestic actions to counter “Chinese predation” through measures like invoking Section 232 of the Trade Expansion Act.
“This is significant. If we’re scrambling to negotiate a new rare earth deal with China, we need to act decisively at home,” Hassaas remarked. “The reality is, moving away from Chinese supplies doesn’t inherently lead to huge cost hikes. The competition is still manageable; it’s more about the willingness to consider those slight additional costs.”
Scissors also urged Washington to reform domestic mining regulations, suggesting a suspension of certain aspects of the National Environmental Policy Act to speed up and reduce the costs of mining efforts. Although the US is poised to become a key lithium producer, bureaucratic hurdles have slowed progress and raised costs.
Mining and refining rare earth elements can be an expensive, often toxic process. Historically, China has overlooked environmental standards in pursuit of low-cost production. However, Myers believes that by embracing innovation rather than mimicking China’s practices, the US could lead in rare earth processing.
Myers’ company, Phoenix Steel, has adopted a novel extraction technique that processes rare earth metals from raw materials without generating toxic byproducts or emissions. Currently, they operate a processing facility in Massachusetts with a second facility set to open in New Hampshire, aiming to produce enough to cover 40% of the US demand.
“We genuinely believe the US can take charge in this field. Countries like China thrive on outdated practices, but they’re not sustainable in the long run,” Myers stated. “These are just technical challenges, and if we approach innovation the right way, we could emerge as a cost-effective leader.”
