Persisting Dominance of China's Rare Earth Sector Amidst Lagging US Investments: Expert Opinions
In a recently published report, the New York-based think tank Strategy Risks has highlighted the US's vulnerabilities in the rare earth sector, stating that the country is paying a price for decades of underinvestment, obsolete policies, and the absence of a coherent strategy. The report, written by analysts on Monday, focuses on the US's dependence on Chinese rare earth exports.
This dependence has been particularly noticeable during recent trade negotiations with Beijing, where China has been increasingly leveraging its dominance in the global rare earth supply chain. The rare earth elements are crucial for the production of high-tech products, making the US's reliance on imported minerals from China a significant concern.
However, the US is not standing idle. The report outlines a multi-pronged strategy to reduce its reliance on Chinese rare earth exports and strengthen its position in the global rare earth supply chain.
**Diversification of Supply Chains and International Partnerships**
The US is actively working to build and expand domestic rare earth mining, refining, and magnet manufacturing capacity for both light and heavy rare earths. This includes engaging with international partners to unlock new deposits and establish alternative processing and manufacturing hubs outside China. For example, the Trump administration has signed memoranda of cooperation with countries like Saudi Arabia to advance a complete mine-to-magnet rare earth supply chain.
**Trade Agreements and Diplomatic Engagement**
Recent trade agreements with China, such as the June 2025 deal, have temporarily improved access to Chinese rare earths by easing export restrictions and lowering tariffs. However, these are seen as fragile truces rather than long-term solutions. The deals require China to expedite rare earth exports to the US under its dual-use licensing regime, while the US offers concessions such as lifting export curbs on certain technologies and providing visa benefits for Chinese students.
**Building Domestic and Allied Capacity**
The long-term US strategy emphasizes reducing dependence on Chinese dominance in rare earth processing. This involves significant investments in domestic rare earth projects and collaboration with allied countries to develop alternative supply chains. The goal is to create resilient supply chains that can weather geopolitical tensions and export controls.
Despite these efforts, China’s continued dominance—especially in heavy rare earth element (REE) processing and military-grade materials—creates ongoing risks for US manufacturers in sectors like defense, automotive, and renewable energy. The recent agreements have stabilized supply chains in the short term and lowered rare earth prices by resuming exports, but delays in export licensing and unresolved geopolitical tensions make the situation precarious.
In summary, the US recognizes that the only long-term solution to the rare earth supply chain crisis is to develop robust, diversified supply chains that do not rely heavily on Chinese exports. While recent trade agreements provide immediate relief, sustained investment and international cooperation remain critical to closing the gap in the global rare earth supply chain.
- The report published by Strategy Risks highlights the US's vulnerability in the rare earth sector, attributing it to underinvestment, outdated policies, and the absence of a coherent strategy.
- The US's dependence on Chinese rare earth exports has been particularly evident during trade negotiations with Beijing, where China has used its dominance in the global rare earth supply chain to exert pressure.
- The report proposes a multi-faceted strategy to reduce the US's reliance on Chinese rare earth exports and beef up its position in the global rare earth supply chain.
- One aspect of this strategy is the diversification of supply chains and the formation of international partnerships, which includes building domestic rare earth mining, refining, and magnet manufacturing capacity.
- The US is also working on establishing alternative processing and manufacturing hubs outside China, and has signed cooperation agreements with countries like Saudi Arabia to advance a complete mine-to-magnet rare earth supply chain.
- Recent trade agreements with China have temporarily eased export restrictions and lowered tariffs, offering a respite to US manufacturers; however, these are viewed as short-term solutions and not long-term strategies.
- To address the ongoing risks posed by China's dominance in heavy rare earth element processing and military-grade materials, the US is investing in domestic rare earth projects and collaborating with allied countries to develop alternative supply chains, aiming to create resilient, geopolitically unencumbered supply chains for sectors like defense, automotive, and renewable energy.
