The Trump administration has been actively working to reduce US dependence on China for rare earths, which are vital for technologies ranging from semiconductor chips to F-35 fighter jets. These efforts include significant financial investment, the establishment of a critical minerals stockpile called "Project Vault," equity investments in firms, and numerous international mineral deals. For instance, USA Rare Earth recently announced plans to acquire Brazil's Serra Verde Group, a company that possesses a rare earth mine and processing plant, offering a non-Chinese source for heavy rare earths, processing, metallization, and magnet production. However, despite these forceful pushes, it will take considerable time to diversify away from Beijing.
China currently dominates the rare earth market, controlling approximately 85% of processing and over 90% of magnet production globally. This includes a near monopoly on the separation of heavy rare earths, a process not currently performed in the United States. This strong control allows China to influence global prices and hinder competitors, and Beijing has shown a willingness to use this leverage, tripling its use of export restrictions between 2021 and 2025. This vulnerability has been highlighted by concerns that the US military's munitions stockpiles, which rely on heavy rare earths, could be depleted in conflicts, further emphasizing China's strategic advantage.
The US still needs to navigate its relationship with China carefully to avoid supply disruptions, as it takes a significant amount of time for rare earth initiatives, funding, and partnerships to translate into actual supply and permanent magnets. Even with Project Vault, it is anticipated that the US will continue to source Chinese materials for its stockpiles in the near future. Experts believe that despite the administration's efforts, the US is still a long way from developing a fully homegrown rare earth supply chain. This dependence gives China a significant advantage in trade negotiations, a card it has played successfully in the past and is expected to continue to leverage.
