ANALYSIS: Rare Earths—China’s Silent Weapon Against the West

Maxime Marquette

2026-06-26 22:14:40

From April 4 to the October blackmail: a calculated escalation

China’s strategy in 2025 was remarkably sophisticated. The restrictions imposed on April 4, 2025, specifically targeted heavy rare earth elements—the hardest to substitute and the most critical for defense applications. This was no coincidence: dysprosium and terbium are essential for the high-temperature magnets used in fighter jet engines and missile systems. China did not cut off supplies of light rare earths (such as neodymium and praseodymium, which are more readily available from Australian and American mines). Instead, it surgically targeted the materials that are the hardest to replace.

In July 2025, a 90-day truce was negotiated. Then, when the truce expired in October 2025, Beijing reimposed even stricter restrictions—just before a scheduled meeting between Trump and Xi in South Korea. An unprecedented “direct foreign product” rule was introduced: even products manufactured outside China but containing materials of Chinese origin now required Beijing’s approval to be sold. This is the rare-earth equivalent of U.S. legal extraterritoriality as applied to financial transactions.

The Timeline of U.S. Dependency: Staggering Figures

Data published by the Center for Strategic and International Studies (CSIS) in its April 2026 report paints a bleak picture for Washington. In 2025, U.S. domestic production covered only one-third of national consumption. Of the remaining 71% of imports, China accounted for the lion’s share. Although the United States had the Mountain Pass mine in California—the leading rare earth mine outside of China—its total production of 8,900 metric tons in 2025 remained insufficient to meet domestic needs, and it focused primarily on light rare earths.

The concrete result: within eight months of the April 2025 restrictions, U.S. imports of yttrium from China plummeted from 333 metric tons to 17 metric tons. Aerospace manufacturers had to streamline their inventories and consider halting production of certain products. The U.S. defense sector—which needs to replenish ammunition stocks depleted by shipments to Ukraine and amid tensions with Iran—saw its supply chain for critical materials become dramatically strained.

Herein lies Trump’s paradox regarding rare earths: on the one hand, he imposes tariffs to “defend American industry.” On the other, that same industry depends on materials that only China knows how to refine. The aggressive trade policy has triggered exactly the kind of countermeasure for which the United States was unprepared. Trump may have understood the rare earths problem. But he pulled the trigger before checking to see if his gun was loaded.

The Impact on the Western Defense Industry

Ammunition, missiles, satellites—everything is vulnerable

The U.S. and allied defense industries are among the most exposed to Chinese restrictions on rare earths. Rare-earth permanent magnets are essential in precision missile guidance systems, anti-drone system actuators, torpedo motors, submarine gyroscopes, and radar and sonar systems. A single PAC-3 missile defense system contains dozens of components that require heavy rare earth elements. Multiplied by the thousands of units needed to replenish arsenals, the dependence is systemic.

The CSIS report identifies a critical deadline: January 1, 2027, the date by which U.S. Department of Defense sourcing regulations will prohibit the use of rare earth elements and magnets from China, Russia, Iran, and North Korea in weapons systems. To meet this deadline, alternative capabilities would need to be operational by then—which is not guaranteed despite the billions poured into alternative projects.

Europe Caught in a Pinch—and Left Out of the Conversation

Europe is in an even more precarious situation. It depends on the same Chinese sources, it has no equivalent to the Mountain Pass mine, and its exports to China in November 2025 surged by 60% year-over-year when Beijing temporarily lifted restrictions—proof that European manufacturers had rushed to replenish stocks they had neglected for too long. U.S. imports, meanwhile, fell by 11% over the same period—a sign that U.S. inventories were better managed in the short term, but that competition for access to available supplies is intensifying.

Australia represents the main alternative hope: with 89 active rare earth mining projects, a strong presence of Lynas Rare Earths as the world’s second-largest producer, and a critical minerals framework agreement signed with the United States in October 2025, Canberra is the indispensable strategic partner for the West’s rebalancing. But building refining capacity takes years. Australian rare earths are still largely refined… in Malaysia, at a Lynas plant where part of the raw material supply comes via China.

Europe’s approach to rare earths is the “head-in-the-sand” syndrome squared. We’ve known since 2010 that this dependence was dangerous. China’s 2010 embargo on rare earths to Japan had already sounded the alarm. Fifteen years later, the lesson has not been learned. Europe will not achieve sovereignty in rare earths by signing declarations of good intent. It needs mines, refineries, capital, and political will—which I do not yet see.

The U.S. response: 7.3 billion and a race against time

An industrial policy unprecedented in decades

Washington’s response has been massive, across all administrations. According to the CSIS, more than $7.3 billion has been mobilized by five U.S. government agencies to rebuild a domestic and allied supply chain for rare earths. A variety of tools have been deployed: direct equity investments (the Department of Defense has become the largest shareholder in MP Materials with a $400 million investment), concessional loans, 10-year off-take agreements, and price floors of $110 per kilogram to secure producers’ revenues.

Projects have been launched on every continent: Australia (at least eight EXIM commitments totaling several hundred million), Brazil (565 million for the Serra Verde project), Greenland (120 million for the Tanbreez project), Angola (160 million for Pensana), Canada, and Mozambique. The Department of Commerce has issued a letter of intent for a $1.6 billion debt-equity package for the Round Top Mountain mine in Texas and a permanent magnet factory in Oklahoma. For the first time since the Cold War, the United States has an industrial policy worthy of the name regarding critical materials.

What even $7.3 billion can’t buy quickly

The problem with rare earths is time. A mine takes 10 to 15 years to develop, including environmental permits. A rare earth refinery takes 5 to 7 years to build. Technicians capable of managing the separation processes for heavy rare earths—a complex and dangerous chemistry—are scarce, and Beijing has explicitly banned the emigration of Chinese experts in the sector. In October 2025, China expanded its restrictions to include an embargo on the export of qualified Chinese nationals and proprietary technologies related to rare earths. This is an attempt to lock down not only the material but also the know-how.

By April 2026, one year after the initial restrictions were imposed, U.S. imports of rare earths had still not returned to pre-restriction levels. The suspension agreement between Trump and Xi, reached in late October 2025 and valid for one year, offers a respite. But the CSIS is clear: this truce should not be confused with a solution. China will use this weapon again in the event of an escalation in the Indo-Pacific—notably to deter support for Taiwan. This is not mere speculation: according to the report, China already exerted pressure on Japan using rare earths in 2026 to discourage its military support for Taipei.

China doesn’t just control rare earths. It has turned that control into an instrument of counterinsurgency foreign policy. Support Taiwan, and you lose access to the materials that power your fighter jets. It’s pure geopolitical judo. And the West finds itself in the uncomfortable position of having to choose between its values and its supply chains. This is no coincidence. It is exactly Beijing’s plan.

Conclusion: Breaking Free from Dependence—A Matter of Strategic Survival

One Year Later: Real Progress, But Still a Long Way to Go

One year after the shock of April 2025, the United States has accomplished more in a single year on rare earths than in the previous ten years combined. The mobilization of $7.3 billion, bilateral agreements with Australia, Japan, Saudi Arabia, and Malaysia, price floors, and guaranteed purchase contracts: these are tangible measures. But the CSIS is unsparing in its assessment: the United States remains far from achieving true resilience. Four of the five minerals classified as highest-risk by the U.S. Department of the Interior are rare earths. Structural dependence cannot be resolved in twelve months.

The suspension agreement between Trump and Xi runs through the end of 2026. What happens next will depend on tensions in the South China Sea, developments regarding Taiwan, and the next U.S. election cycle. What is certain is that China has proven it is willing to use this weapon. The West now has a strategic obligation to ensure it never again finds itself so vulnerable.

The key takeaway: supply chains are chains

The lesson from rare earths is universal and applies beyond metals. The rampant outsourcing of industrial production to a single country—even if economically rational in the short term—creates strategic dependencies that are lethal in the long term. Semiconductors (Taiwan), batteries (China and South Korea), rare earths (China), active pharmaceutical ingredients (China and India): wherever the West has optimized its supply chain for cost, it has created a vulnerability. The geopolitical competition of the 21st century will be won as much in mines and refineries as in AI laboratories. The West has fallen behind. It can still catch up. But time is running out.

By Maxime Marquette, columnist