Potential US-China Trade 'deal'highlights US dependence on China's rare earth minerals

Forbes

a day ago

President Donald Trump announced that the U.S. has reached a trade deal with China, subject to final approval by Chinese President Xi Jinping. A central component of the deal, reportedly includes expanding U.S. access to Chinese rare earth minerals, in exchange for concessions allowing more Chinese students to attend American universities and the export of sensitive products to China.
Though the full details of the deal are still unfolding, the U.S. is at a disadvantage in the negotiations. Reportedly Beijing is only offering a concession that it had already offered a month ago to lift the blockade on shipments of rare earth minerals. The current deal may be a short-term solution for a much larger, long-term problem.
Much attention has been given to the importance of rare earth minerals for electric vehicles, electronics, robots and wind turbines. But rare earth minerals are not just important to the global economy and energy supply. They also play a critical role in defence. Syracuse University Professor Sean McFate claimed that 'what oil was to the 20th century, rare earth minerals are to the 21st."
Rare earths minerals are used in almost every form of advanced defence technology. Tanks, lasers, missiles, fighter jets, submarines, and warships all rely on rare earth minerals. Just one F-35 fighter jet uses about 900 pounds of rare earth minerals.
Consisting of a group 17 metals (and ranging from heavy to light), each rare earth mineral offers distinct properties and uses. Minerals such as neodymium is a key component in missile guidance systems, such as the Tomahawk cruise missile, helping it to be more precise and manoeuvrable. Yttrium is used to coat jet engines to ensure that they don't melt mid-flight due to high temperatures. Gadolinium is crucial for sonar and radiation detection systems and radiation shielding, especially in nuclear-powered submarines.
Though there is an abundance of rare earth minerals with 110 million tonnes of deposits across the world, China dominates the market, producing more than 70% of the total supply.
While the US is the second largest producer generating 14% of the total, 70% of U.S. rare earth minerals imports come from China. Worldwide China maintains a near monopoly-accounting for 61% of rare earth production and 92% of their processing.
China's dominance is even greater in heavy rare earth minerals—which are more critical to the production of defence equipment . It processes nearly 100% of heavy rare earth minerals. At one point Vietnam also had some capacity to process these types of minerals, but its facility was shut down in 2024 and is no longer operable.
China is also the world's sole producer of samarium, a light rare earth metal that is vital for military hardware including building fighter jets, missiles, electric warfare systems, and radar and sonar applications. Samarium magnets are essential for signal generation and play an important role in navigation, target tracking and threat detection. Samarium magnets are also valued because they can tolerate high temperatures without losing their magnetic force, which is critical to withstanding the heat created by fast moving motors.
Currently the U.S. is lagging far behind in production capacity—and has only has two domestic rare earth mining centers located in the state of Georgia and in Mountain Pass, California.
But the U.S. hadn't always trailed China in this area. From the 1960s until the 1990s, the U.S. was the global leader in rare earth production. This all changed in 1998 when Molycorp, then the only U.S. rare earth producer, shut down its chemical processing operations after a radioactive wastewater leak. At the same time, production had already shifted to China due to low labour costs and lax environmental standards.
Since then concerns over rare earth dependency have circulated in Washington for years. By 2010 policymakers were raising the alarm that the U.S. was losing its rare earth production capacity to produce minerals that are critical to national security just as China was tightening export controls.
Under the Biden administration, the Department of Defence earmarked more than $439 million to build a domestic 'mine to magnet' supply chain. Additionally, in 2022, the company MP Materials was awarded a $35 million contract from the Department of Defence to build a facility that could process heavy rare earth elements in Mountain Pass. Biden also tried to issue a large contract to construct two samarium production facilities, but this plan never materialized.
As part of Trump's ongoing trade war with China, Beijing strategically applied export restrictions (requiring domestic producers to apply for export licences from the Chinese government) in April on seven medium and heavy earth metals including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, which are all important to the defence industry.
Trump's announcement of a deal may mean that these export restrictions on rare earth minerals have been reversed. But knowing how important these minerals are to U.S. national security, there are no guarantees that China won't rescind this offer in the future and use its rare earth dominance to push for a deal that's even more favorable to its own terms.