China’s rare earth dominance threatens US security

Source: The post China’s rare earth dominance threatens US security has been created, based on the article “Rare earth minerals as China’s ‘trump’ card” published in “The Hindu” on 5 May 2025. China’s rare earth dominance threatens US security.

UPSC Syllabus Topic: GS Paper2-International Relations-Effect of policies and politics of developed and developing countries on India’s interests.

Context: The US-China tariff war may favour China due to its dominance over rare earth minerals. While the US imposed tariffs to pressure China, the real vulnerability lies in China’s potential to restrict rare earth exports, which are critical for US defense and technology industries.

For details information on RARE EARTH MINERALS  read this article here

China’s Dominance in Rare Earths

1. Near Monopoly Over Processing: China produces 61% of the world’s rare earths but processes over 92% due to its low-cost advantage and large-scale operations. Processing is energy-intensive and expensive, and the US lacks significant domestic refining capabilities.
2. Heavy Dependence of the US: Between 2020 and 2023, 70% of US rare earth imports came from China. Even though the US mines rare earths (e.g., Mountain Pass, California), it relies on China for processing.
3. Strategic Use of Export Controls: In 2023, China restricted exports of seven heavy rare earth elements including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These materials are vital for electronics, defense, and clean energy technologies.

Potential Fallout for the US

1. Impact on Critical Sectors: Rare earths are essential for permanent magnets used in electric vehicles, wind turbines, LED lights, semiconductors, and military equipment like fighter jets and missiles. A Chinese export ban would severely disrupt US production and supply chains.
2. Lack of Alternatives: The US has limited options to shift its sourcing in the short term, making it highly vulnerable to disruptions in rare earth supply.
3. Limited WTO Recourse: Though WTO rules generally discourage export restrictions, China’s move may violate these norms. However, the US is also violating WTO’s Most Favoured Nation (MFN) principle via reciprocal tariffs, weakening its ability to challenge China legally.

Historical Precedents of Export Restrictions

1. China-Japan Dispute (2010): China halted rare earth exports to Japan after a maritime dispute, affecting Japan’s auto industry. Japan released the detained Chinese captain under pressure.
2. Indonesia’s Nickel Ban (2020): Indonesia banned nickel ore exports to attract investments in domestic processing, successfully enhancing its role in the EV supply chain despite EU complaints.
3. Other Examples (2022): Russia restricted wheat and fertilizer exports to counter Western sanctions. The US imposed semiconductor export controls to slow China’s tech growth.

Strategic and Economic Impact on China

1. Minimal Domestic Disruption: Rare earth exports to the US form a small part of China’s trade portfolio. Thus, banning them won’t create major surpluses or hurt domestic industries.
2. Redirection to Other Markets: China can redirect exports to other countries to offset US losses, further neutralizing the impact of US-imposed tariffs.

Conclusion

If the trade war continues, US tech and defense sectors will suffer more from rare earth shortages than from tariffs. China’s control over processing and its strategic use of export bans give it a strong advantage. The US faces a critical vulnerability with few short-term remedies.

Question for practice:

Examine how China’s dominance in rare earth processing creates a strategic advantage in the US-China tariff war.