How Might U.S.–China Tensions or Future Sanctions Impact Global Access to Rare Earths?

The global race for technological supremacy increasingly hinges on the control of materials that few people ever see — rare earth elements (REEs).

These 17 obscure metals are the lifeblood of modern civilization, critical to manufacturing electric vehicles, wind turbines, smartphones, and — most importantly — advanced military and aerospace systems.

Today, China dominates more than 90% of rare earth refining and over 80% of the world’s permanent magnet production. This dominance gives Beijing a powerful lever in the global economy, one that could profoundly shape the outcomes of escalating U.S.–China tensions.

As rivalry between the two superpowers intensifies — over technology, trade, Taiwan, and global influence — rare earths have quietly become both a strategic weapon and a potential flashpoint.

Future sanctions, trade wars, or military crises could dramatically disrupt global access to these materials, reshaping industries, alliances, and the balance of economic power.

1. The Backbone of Modern Power

Rare earth elements underpin nearly every strategic technology:

• Neodymium, praseodymium, dysprosium, terbium – used in permanent magnets for electric vehicles, drones, jet engines, and missile guidance systems.

• Yttrium, europium, gadolinium – essential in lasers, sonar systems, and medical imaging.

• Samarium-cobalt magnets – critical for high-temperature applications in submarines and aircraft.

In short, without rare earths, much of modern warfare and green technology becomes impossible. This gives the nation that controls their supply — primarily China — an outsized influence over the pace of global innovation and security readiness.

2. The U.S.–China Rivalry Moves Beyond Trade

Over the past decade, relations between Washington and Beijing have shifted from cautious cooperation to systemic rivalry. What began as a trade dispute has evolved into a broader struggle over technological dominance, industrial control, and geopolitical alignment.

Key flashpoints include:

• Taiwan — the world’s leading chip manufacturer and a potential trigger for military confrontation.

• Technology sanctions — U.S. restrictions on advanced semiconductor exports to China.

• South China Sea militarization — where freedom of navigation operations challenge Chinese territorial claims.

• Global alliances — as the U.S. strengthens ties with Japan, India, and Australia (the Quad) to counterbalance Chinese influence.

Against this backdrop, rare earths sit at the intersection of technology, trade, and defense, making them both a vulnerability and a potential instrument of economic statecraft.

3. The Weaponization of Rare Earths

China has already demonstrated its willingness to use rare earths as a geopolitical tool. The most famous example occurred in 2010, when Beijing informally halted rare earth exports to Japan during a territorial dispute over the Senkaku (Diaoyu) Islands. Prices for neodymium and dysprosium soared, and Japanese industries faced immediate production delays.

Since then, the threat of a rare earth embargo has hung over every U.S.–China confrontation. Chinese state media has often hinted at using “strategic materials” as leverage. For instance:

• In 2019, during the Trump-era trade war, Chinese outlets like Global Times and People’s Daily suggested that rare earths could be withheld if Washington continued targeting Chinese tech giants like Huawei.

• In 2023, Beijing announced export controls on gallium and germanium — two lesser-known but vital elements for semiconductors and defense optics — signaling its readiness to respond to Western chip sanctions.

• By 2025, China has further tightened oversight of rare earth exports under the pretext of “national security,” effectively giving the government a licensing power over who can buy what.

If tensions worsen — for example, in the event of a Taiwan blockade, cyberwarfare escalation, or NATO involvement in Asian security — China could extend these controls to the entire rare earth sector, causing a shockwave through the global economy.

4. Economic Fallout: A Global Chain Reaction

A rare earth supply disruption would ripple through multiple sectors almost instantly.

a. Defense and Aerospace

The United States and its allies rely heavily on Chinese-processed materials for radar systems, missile guidance, and aircraft engines. Even short disruptions could halt production lines for F-35 jets, Patriot missiles, and naval sensors. Stockpiles would cushion the blow only briefly.

b. Green Technology and EVs

Electric vehicle motors and wind turbines use large amounts of neodymium and dysprosium. A sudden cutoff would spike prices and slow global green energy transitions. Ironically, Western decarbonization efforts could stall due to dependency on a single authoritarian supplier.

c. Consumer Electronics

Smartphones, speakers, and laptops all contain rare earth-based components. A supply shock would raise prices and tighten production capacity worldwide — hitting both Western tech giants and Chinese assemblers.

d. Emerging Markets

Developing nations dependent on imported green tech or industrial components could face prolonged stagnation as global prices surge. This could widen the North–South economic divide and amplify geopolitical instability.

5. The Sanctions Spiral: How Both Sides Could Escalate

Future U.S.–China sanctions may not take the form of outright bans but rather strategic export controls and counter-sanctions targeting each other’s technological foundations.

• U.S. Measures could include sanctions on Chinese rare earth producers, investment bans in critical mineral processing, or export restrictions on refining equipment and software.

• Chinese Countermeasures could include retaliatory export controls on rare earth oxides, magnets, or refining intermediates — especially to U.S.-aligned nations.

Each move would deepen global uncertainty, forcing countries and corporations to choose sides or reconfigure supply chains.

For example:

• If the U.S. imposes restrictions on Chinese magnet exports, Beijing could retaliate by limiting shipments of processed oxides, crippling Western magnet manufacturers.

• If China imposes full rare earth embargoes, Washington could respond with secondary sanctions targeting firms in third countries (like Malaysia or Vietnam) that transship Chinese materials — expanding the conflict into global trade routes.

The result could be a strategic decoupling of rare earth supply chains — one anchored around China, and another around the U.S. and its allies.

6. The Global Realignment of Supply Chains

In anticipation of these risks, countries are already racing to diversify their rare earth sources.

• The U.S. is funding domestic refining at the Mountain Pass mine and new processing plants in Texas.

• Australia (Lynas Rare Earths) and Canada are scaling up mining and separation capacity with government backing.

• Japan has invested in rare earth recycling and extraction from ocean sediments.

• The EU launched the Critical Raw Materials Act (2024), aiming for 40% of strategic materials to be processed domestically by 2030.

• Africa, especially countries like Burundi, Tanzania, and Madagascar, is emerging as the next exploration frontier for rare earth extraction and refining partnerships.

However, rebuilding a supply chain as vast and technologically complex as China’s will take years — possibly a decade or more. In the meantime, the world remains structurally dependent on Chinese processing.

7. Potential Winners and Losers

If a full-scale rare earth decoupling occurs:

• China could suffer short-term export revenue losses but gain strategic control over domestic supply, forcing Western industries to pay higher prices or delay production.

• Western nations would face temporary shortages but might accelerate the creation of alternative ecosystems — in the U.S., Australia, India, and Africa.

• Emerging economies could benefit if they attract Western investment for mining and refining — but only if they negotiate fair value retention and avoid resource exploitation.

Ultimately, the outcome will depend on how quickly non-Chinese capacity can scale and how deeply sanctions bite into the global trading system.

8. The Long-Term Outlook

A world divided into competing rare earth blocs would mirror the Cold War bifurcation of technology and industry. Instead of nuclear deterrence, nations would now compete for access to critical materials, refining technologies, and advanced manufacturing clusters.

China’s strategy is to remain indispensable, while the U.S. seeks to make China replaceable. Both cannot happen simultaneously — and the friction between these two visions will define the next decade of global economic geopolitics.

9. A Strategic Tug-of-War for the Material Future

The rare earth question is not just about metals — it is about control of the future itself. As U.S.–China tensions escalate, the battle over who refines, exports, and controls these materials will shape global access to energy, defense, and digital infrastructure.

Future sanctions could divide the world into material spheres of influence, where supply chains become tools of power, not just commerce. In such a world, sovereignty will belong to those who can refine, innovate, and sustain themselves — not merely those who can mine.

The age of rare earths has revealed a hard truth: in geopolitics, the power to refine is the power to rule.