The Global Rare Earth Resources Game under the China-US Trade War
The Global Rare Earth Resources Game under the China-US Trade War
Blog Article
Rare Earths Resource War Intensifies
There was a significant escalation in the US-China trade war in April 2025. The Americans raised tariffs on Chinese goods to 145% until April 10. The US also quit the duty-free policy for shipments from China by May 2. It had a significant effect on such e-commerce giants as Temu and Shein. China took retaliatory measures on April 11. In the first place, they raised tariffs on US goods to 125%, and secondly, they cut imports of US beef, poultry, and LNG, as well as their lists of agriculture and energy commodities.
Further, 11 US companies were included in a Chinese unreliable entity list. Communications and antitrust regulators targeted Google and DuPont. The most severe action was China's direct imposition of restrictions on the export of 7 types of heavy rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—on April 4. In reaction to intensified trade conflicts, China limited exports of rare earth elements, creating challenges for US supply chains.
Global Rare Earth Landscape: China’s Lead and International Challenges
Rare earths are the irreplaceable foundation of modern technology. From neodymium magnets used in electric vehicle to terbium-dysprosium-enhanced defense equipment and scandium-catalyzed aerospace alloys, rare earths are present in every corner of our lives. However, the worldwide rare earth market shows an extreme asymmetry, with China holding the reins.
In 2024, nearly 7 out of every 10 tons of rare earths globally were from China, and the country reported a production of almost 70% and a processing capacity of over 80%. When it comes to heavy rare earths such as samarium, gadolinium, terbium, and dysprosium, China is in a class of its own, as the technological barriers make it nearly impossible for the competition to catch up. China did not gain such control in a single day: in the 1990s, the country took over the market using low-cost competition and lax environmental regulations. At the same time, the Western rare earth industries died out. Currently, China's plants and supply routes are not just production titans but also havens of technology.
On the other hand, the West headed toward the direction of failure. The US, although having Mountain Pass of California, depended on China for 70% of its rare earth imports in 2020-2023, with the remaining 13% and 6% contributed by Malaysia and Japan, respectively. The high cost of extraction, strict environmental regulations, and the lack of processing expertise are the main obstacles to self-reliance. Europe and Japan are also under China's influence, and the trade war entirely laid bare supply chain vulnerabilities. Due to the 2010 China-Japan rare earth dispute, Japan is still holding its guard.
Additional companies present in the industry would be Australian Lynas and the Canadian firm Neo Performance Materials. However, the problem with these two companies is that they do not have the magnitude to compete with China. On the other hand, there are outstanding deposits of rare earth minerals in Vietnam, Brazil, and African countries. Still, due to the lack of infrastructure and funding, they cannot develop these resources.
Pre-Trade War Diversification Efforts: Global Breakthrough Attempts
China's dominance is a two-edged sword—it has an authoritative influence over the world's supply chains but is also a catalyst for global precaution. Countries acknowledged the threats posed by having a single rare earth source long before the upheaval of the trade war in 2025 and have thus started diversifying as a preemptive tactic to minimize the losses that could occur at the advent of the storm.
America’s Domestic Revival
The U.S. has been proactive in getting back on the path to becoming the master of rare earth materials. MP Materials developed the first new rare earth mine in America, Mountain Pass, and in less than a week, will have a new outpost in Texas producing neodymium-praseodymium and rare earth magnets—truly a first step to building a complete supply chain without import. Besides, they plan to construct a neodymium magnet factory in South Carolina in 2025. at the same time, the over $500 million invested is for job creation and to lessen the dependence on China.
What is even more disruptive is Niron Magnetics. This company was started by a group of people who were encouraged by the one and only Niron Magnetics. By the end of 2024, they created the first factory in the world without the participation of the Earth Magnet in Minnesota. Thus, iron nitride will be the main material for “Clean Earth Magnets.”
Europe’s Recycling and Collaboration
Europe is making efforts to improve recycling and localization. HyProMag, a company based in the UK, has successfully started to utilize hydrogen-based recycling (HPMS). The production has been in Birmingham since 2024, and the first run will have an output of 20 tons of rare earth magnets per year, with plans for further expansions in Germany and the US. Neo Performance Materials of copyright has arranged to open a facility in Estonia that will manufacture sintered magnets with a capacity of 2,000 tons per year by 2025. The company also has long-term contracts to supply the EV market in Europe. VACUUMSCHMELZE from Germany has joined forces with a Canadian company, Cyclic Materials, to recycle materials and, in return, use the materials to service the new North American plant, setting up a sustainable supply chain.
Emerging Producers’ Rise
Both Lynas and Iluka of Australia are putting into service a rare earth processing plant allocation in the USA and Australia, targeting global markets by 2026. At the end of 2024, the CIT SENAI ITR of Brazil started America's first rare earth magnet factory, based on a 100-ton annual capacity from Australian raw materials. this was an attempt to challenge the power of China in this sector. Vietnam is not left behind in development. It is gradually increasing its processing capacity through relations with China and Japan, thus trying to secure the highest possible gains from a neutral perspective.
Yet despite all the promise, these initiatives have to overcome the same obstacles, namely high environmental compliance costs, technological difficulties, and lack of finance. Diversification has already begun, but eliminating China is still impossible.
Rare Earth Game in Escalating Trade War: US-China Rivalry and Global Ripples
The 2025 trade war has propelled the rare earth battle to a climax. On April 4, China’s export controls on seven heavy rare earth elements struck global supply chains like a bombshell, not merely a retaliation to US tariffs but a move with profound strategic intent.
America’s Breakout Struggles
Realizing the risky situation the US is in with rare earth metals, the country takes countermeasures quickly. Through the Defense Production Act, subsidies were given to local producers to become strong, with the example of the Mountain Pass mine and Texas' new factory. The US is creating a "de-China" rare earth alliance with Australia and copyright, which is centered on Lynas's processing plants and Canadian mining projects.
On the other hand, there are difficulties to overcome. Rare earth refining is both a scientific and technological area, and the US currently lacks the required knowledgeable workforce. Strict environmental laws have caused miners to hike their prices. This is the case of Mountain Pass, whose production costs were too steep, which led to its closing, and now, it relies on the government for support. While the new technology, such as Niron's iron-nitride magnets, is a good lead, they are still far from saturation in the market.
Global Chain Reactions
China's controls were the first link in a chain reaction. Japan, South Korea, and other rare earth buyers began hoarding, which shot prices to the stars. Manufacturers of automobiles and wind turbines in Europe are now in a situation where they have to cope with the higher costs and the increased risks of their supply chains. The countries rich in resources, such as Vietnam and Brazil, are happy about the tremendous US-Chinese investments they attract. Still, they are also worried about getting caught up in the rivalry among the great powers.
The possible consequences of the trade war spreading are that China might move a step further and introduce more severe export restrictions, even to light rare earths. As trade tensions escalate, the uncertainty in rare earth supplies may further heighten global market strains, prompting countries to accelerate supply chain adjustments. Nations may respond through diversified mining, technological innovation, or international cooperation, ushering the global rare earth industry into a new phase of restructuring.
Market Challenges and Industry Impacts
Rare earths are behind the scenes, making tech make a significant leap and significantly contributing to the industry's rapid growth. In 2024, global electric car (EV) sales surpassed 14 million, with each high-efficiency motor consuming kilograms of neodymium and dysprosium, thus increasing the demand for rare earths by 15% annually. A wind power capacity of 900 gigawatts was achieved, and permanent magnet generators contributed significantly to the lightweight and strengthening of turbines. The market for AI and robots is forecasted to exceed $500 billion at the end of 2025, and terbium and dysprosium are required for precision servo motors and sensors.
China's 2025 export controls have set off a chain of events that has resulted in a price storm. According to Bloomberg New Energy Finance, EV and wind power growth might slow to 15% and 8%, respectively. At the same time, AI hardware production will face severe production bottlenecks due to the price hike due to China's export control of heavy rare earth by 2025. Furthermore, the reduced availability of rare earths might cause the price of high-tech devices to rise, including those used in smartphones and missiles.
The alternatives available in technology are not fully developed yet. The sintered magnetic materials that Niron Magnetics is trying to materialize without rare earths are one example, but they lack significant output power. Recycling technologies, such as HyProMag's HPMS, can alleviate the situation but can hardly cope with rising demand. In the face of the storm, domestic supply chains that the US and Europe rely on should work out more quickly. the challenge remains that they must deal with time constraints and technological problems.
Conclusion and Outlook: The Future Path of the Rare Earth Game
The rare earth battle unleashed by the US-China trade war is a struggle between resource control and technological progress and a collision between a single supply source and diversified strategies. In the short term, China holds the resource high ground, beyond the reach of any others, but the US and its allies are trying to break through and take the lead in technology, and it is the element of time that is their biggest enemy. The game is not just a matter of economics, but it also has the potential to change the world's geopolitical landscape.
There can be no doubt that price turbulence will be witnessed in the rare earth market in the short term, high-tech costs will soar, and the likelihood of a disrupted global supply chain will increase. Apart from the possible actions Japan, South Korea, and others might take regarding the stockpiling of the resources, investments will likely skyrocket in rich countries, like Vietnam and Brazil, due to their vast resources. The US and Australia will be able to relieve the situation to some extent by increasing output in the medium term, yet China's grip on the markets and processing will not change. Long-term technological breakthroughs will be the decisive factor in solving the deadlock. Innovations like rare-earth-free magnets, state-of-the-art recycling, or new mining developments could make the situation less harmful, while the WTO's trade rules can bring order to the chaotic contest.
Report this page