Over the past year, rare earth metals have become a flashpoint in the trade war between Washington and Beijing. In December 2023, China blocked exports of technologies used to extract and separate these metals. In April 2025, responding to Trump-era tariffs, it put limits on the export of seven rare earth elements and magnets.
The move sent shockwaves through critical industries in the US and Europe. China controls about 60% of global production and 91% of processing, leaving both the US and EU highly reliant — around 80% and 98%, respectively.
The impact has been immediate. In the US, rare earths are essential for F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, drones and more. “The United States is already struggling to keep pace in producing these systems. Meanwhile, China is rapidly expanding its munitions manufacturing capacity and stockpiling advanced weapons and equipment at a rate estimated to be five to six times faster than the US,” said Gracelin Baskaran, director of the Critical Minerals Security Programme at the Center for Strategic and International Studies (CSIS).
On 30 October 2025, after a meeting between Donald Trump and Xi Jinping in South Korea, the U.S. and China reached a temporary truce in their trade war. Both leaders agreed to lift all restrictions on rare earth purchases for one year, with a review set at the end of that period. A week before the talks, Beijing had rolled out what were effectively draconian licensing rules, supposedly in response to new U.S. export restrictions. Under the rules, companies worldwide needed Chinese approval not only to buy rare earths but also to sell any products containing even trace amounts.
After Trump’s visit, European officials — including representatives from Germany — headed to China this week to negotiate supplies of rare earths and semiconductors. These materials are crucial for key European industries, which have grown increasingly exposed amid the Russian war in Ukraine. In late September, Europe’s largest rare earth magnet factory opened in Estonia. But even with that, experts say Europe still has a long way to go to catch up with China — first, it must tackle all the hurdles standing in its way.
What are rare-earth metals?
Rare-earth metals are a group of 17 elements, including scandium, yttrium and the lanthanides, that are critical to a wide range of industries. Many of the products we use every day rely on them, often without us realising it. Phones, laptops, aircraft, satellite systems, batteries for electric vehicles, wind turbines, solar panels — almost none of these could function without rare-earths. They are also vital for defence production, a factor that has gained even more importance during the war.
Estimates from the U.S. Geological Survey put global reserves of these metals at 90 million tonnes as of January 2025. China holds 44 million tonnes and dominates global processing. Other significant reserves are found in Australia (5.7 million tonnes), Vietnam (3.5 million tonnes), Brazil (21 million tonnes), Russia (3.8 million tonnes), India (6.9 million tonnes) and the United States (1.9 million tonnes).
But having deposits is only part of the equation. The real challenge lies in extracting and processing these metals at the scale needed for industrial production.
China’s monopoly and its consequences
Extracting rare-earth minerals relies heavily on chemicals, producing toxic waste and causing serious environmental damage. Baotou, the largest city in China’s Inner Mongolia region and a key centre for rare-earth mining and processing, has long struggled with the consequences of poorly regulated operations. About 20 kilometres from the city sits a 10-kilometre tailings pond, known as the Weikuang Dam, filled with waste from ore processing — a persistent environmental hazard.
“In winter and spring, the sludge dries out, and dust blown off the lake is contaminated with lead, cadmium and other heavy metals, including traces of radioactive thorium, according to technical papers by Chinese scientists. During the summer rainy season, the sludge is covered by water, which mixes with toxic substances and thorium. This dangerous mixture seeps into the groundwater beneath the lake,” The New York Times reported.
While the Chinese government has taken some steps to clean up the site, built in the 1950s, its sheer size makes a full overhaul impossible. Similar sites exist worldwide, and in countries with weaker institutions, environmental damage can be even more severe. China also conducts rare-earth extraction in parts of Africa and Southeast Asia. Activists recently reported that mining in Myanmar — where a civil war continues — has contributed to pollution in the Mekong, Southeast Asia’s largest river and a crucial regional waterway.
Processing rare-earth metals is costly, and China holds a near-monopoly in the sector. According to the International Energy Agency, in 2024 China accounted for roughly 60% of global rare-earth production (followed by Myanmar, Australia, and the United States), 91% of processing — with Malaysia a distant second — and 94% of permanent magnet production, which is used in electric vehicles, wind turbines, industrial motors, data centres, and defence systems. Just two decades ago, Beijing’s share of production was only 50%.
“This high concentration of the rare-earth market in China makes global supply chains in strategic sectors such as energy, automotive, defence, and AI data centres vulnerable to potential disruptions,” the IEA analysts said.
Washington still trying to catch up
Rush Doshi, a Biden administration official overseeing China and Taiwan, wrote in a New York Times column that in the trade war between Beijing and Washington — which reached a truce last month — China has proven itself “America’s equal,” with rare-earth metal supplies playing a critical role.
Over the past year, the United States has been trying to close the gap by ramping up production and processing of rare-earth metals. In recent months, the Trump administration “acquired stakes in several mining and mineral companies. The White House also announced plans to create a strategic stockpile of rare-earth minerals and support U.S. producers through price and tariff controls,” The New York Times reports. On October 20, the U.S. and Australia struck an agreement to boost supplies of rare-earth and other critical minerals. Experts caution, however, that challenging China’s dominance in the near term will be difficult, as building new mines and processing plants could take years.
Brussels also seeks solutions
One example is Europe’s largest rare-earth magnet factory, which started operating in Estonia in September. Built with EU backing in just over a year, the plant is expected to begin supplying European companies next year. Even if it hits its target output of 2,000 metric tons, that would cover only a small portion of Europe’s needs. The factory will rely on raw materials imported from Australia and Malaysia.
Experts point out that while Europe does have rare-earth deposits, major constraints and a lack of experience make mining challenging. By contrast, China has decades of expertise and patented technologies in this field. Deposits also exist in Turkey, Sweden, Norway, and Ukraine. “Europe is also weighed down by lengthy approval processes and strict environmental standards in mining, meaning any regional plans to develop rare-earth deposits could take years,” U.S. analysts note.
Last month, Brussels unveiled the REsourceEU programme, designed to cut the EU’s reliance on Chinese rare-earth supplies. European Commission President Ursula von der Leyen said part of the solution lies in processing existing raw materials. “Some companies can recycle up to 95% of the critical raw materials contained in batteries,” she noted. Brussels also plans to boost investment in projects focused on the production and processing of critical raw materials within Europe and to speed up partnerships with countries such as Ukraine, Australia, Canada, Kazakhstan, Uzbekistan, Chile, and Greenland to secure these essential resources.
