The Rare Earth Fault Line Has Finally Broken

Years of drift have led us to this point. Now it’s time to dig ourselves out.

In London this week, we will see discussions on the US-China trade relations, particularly regarding rare earth minerals. While some view this as a new development in the geopolitical standoff, it’s frankly neither new nor surprising. This situation stems from decisions made long ago and hardly affects immediate choices.

Beijing holds an almost monopoly on the global rare earth supply, a known vulnerability for over a decade. In fact, it’s one of the most predictable tensions in modern trade politics. Rare earths are vital for semiconductors, electric vehicles, advanced weaponry, and renewable energy systems. China not only possesses these resources but has also established its supply chain through a strategic investment across all production stages. Meanwhile, the US system often seems to engage in a kind of predatory state-supported mercantilism, relying on market forces and quarterly profits.

Washington is now working to limit its vulnerability during these discussions in London. President Trump has long warned about the risks of relying on adversaries for crucial materials, yet he attempts to use tariff talks to help Beijing restore its export flows. China appears to have resumed processing several rare earth export licenses, but it’s unclear who stands to gain and under what conditions.

Evasive Crisis

This situation could have been averted. Back in 2017, we reported on unstable conditions surrounding America’s only rare earth mine in California’s Mountain Pass. We suggested that strategic national interests might warrant direct federal intervention. Although the mine is currently operational under MP Materials and produces a significant share of global rare earth concentrates, processing and purification still largely occur in China. As I pointed out back then, the U.S. has depended not just on Chinese resources but also on its capital and expertise.

The current standoff isn’t a sudden act of aggression from China; I didn’t take action when the warning signs emerged. The risks became evident when Beijing hinted in 2021 about potential export restrictions intended to pressure U.S. defense firms. Nevertheless, policymakers opted for working groups and task forces rather than implementing a robust industrial policy.

Now, the Trump administration seems to be shifting towards a more assertive stance. Tariffs are being imposed on Chinese products, including those crucial for green technologies. Still, this week’s meeting in London underscores that we remain dangerously dependent on Chinese rare earths.

There’s a wider lesson to consider. “Globalization” doesn’t eliminate strategic competition; it merely conceals it until one party decides to wield its power. Rare earths serve as just one example. There are likely many other components, inputs, and minerals that fall into the same precarious category.

The rare earth crisis will eventually resurface. The real surprise isn’t that it occurred, but how little we’ve done to prepare.