As global powers race to secure strategic resources, the contest is no longer limited to tariffs or technological supremacy. A more elemental confrontation is unfolding, namely over rare earth elements (REEs). These 17 chemically similar elements are termed “rare” due to the notorious complexity of extracting and refining them, and are vital for a wide range of high-tech applications (1, 2). While the names of rare earth elements — such as neodymium, yttrium, and europium — may be unfamiliar to many, the products they enable are not (3).

Rare earth elements are indispensable to both everyday life and cutting-edge innovation. They power the permanent magnets in electric vehicle motors, wind turbines, and drones, and are essential for the functioning of fiber optics, satellite communications, and advanced weaponry (1). Their role is particularly vital in the global push toward decarbonization: without REEs, the large-scale deployment of clean energy technologies — from solar panels to electric mobility — would be nearly impossible (2). As a result, REEs are enablers of the green and digital transitions central to 21st-century economies. Neodymium, for instance, is used in loudspeakers, hard drives, EV motors, and jet engines to enhance efficiency. Europium and yttrium are key to producing television and computer screens (1).

China’s dominance in this sector grants it significant geopolitical leverage, increasingly shaping global trade dynamics and even national security strategies (4, 5). As the world transitions toward green energy and digitalization, the demand for REEs continues to grow rapidly (6). Yet despite this surge, the overwhelming majority of the global supply chain flows through one nation: China.

Strategic monopoly in a critical industry

China’s control over REEs is a product of long-term industrial strategy. Today, China accounts for approximately 70 percent of global rare earth mining, and as much as 90 percent of refining and processing (6). Even as other countries, including Australia, hold substantial rare earth reserves, China dominates the global refining capacity, which is a critical chokepoint in the supply chain. Rare earths can be found in other regions of the world, however the processing has largely been offshored to China, being environmentally hazardous, capital-intensive and technologically complex (7). As China was willing to tolerate the costs in exchange for economic and strategic gain, this created an uncomfortable dependence for Western economies, sourcing the majority of its rare earth imports from China (8, 9).

Despite repeated warnings from security analysts and defense officials, this dependency has deepened over the last two decades (10). A recent U.S. Department of Defense report to Congress made clear the risks as the Pentagon warned that Chinese export controls could disrupt the production of next-generation weapons systems and delay the rollout of critical technologies, leaving the U.S. exposed at a moment of mounting global instability (11). The European Union likewise recognized the strategic threats posed by overreliance on China for REEs. Policymakers are increasingly concerned that supply disruptions, whether these are caused by geopolitical tensions or export restrictions, could jeopardize Europe’s industrial competitiveness, military readiness, and climate ambitions (12). In response, the EU introduced the Critical Raw Materials Act (CRMA), aiming to secure access to key minerals essential for green and digital transitions. The CRMA sets concrete targets for 2030, as they are aiming for at least 10% of the EU’s annual consumption to be extracted domestically, 40% processed within the EU, and 25% sourced through recycling (13). These ambitions signal a shift toward strategic autonomy; however meeting them will require substantial public and private investment.

Economic weaponization: China’s retaliatory controls

In parallel to Trump’s 50 percent tariff on imported copper, Beijing has turned to its own arsenal, namely its rare earth exports (14). China implemented stringent new licensing requirements for the export of seven REEs (15). Though couched in the language of national security and nonproliferation, such restrictions were widely interpreted as a strategic response to sweeping U.S. export controls on Chinese battery and semiconductor firms (16).

The consequences of rare earth dependency are already materializing. Industries across North America, Europe, and parts of Asia have reported growing vulnerabilities in their supply chains, with analysts warning that disruptions could pose serious economic and strategic risks. Manufacturers across automotive, aerospace, and electronics sectors have voiced concerns over potential shortages and production slowdowns. For instance, the automotive sector was one of the earliest affected as in 2022 both Volkswagen and Tesla warned of potential production slowdowns as critical magnet materials became scarce (17, 18). While China has maintained tight controls despite temporary trade war truces, these restrictions underscore China's intent to retain significant leverage in future negotiations. The pressure is echoed by industry leaders. The European Automobile Manufacturers’ Association (ACEA) and the German Association of the Automotive Industry (VDA) jointly warned that China’s rare earth export restrictions threaten the stability of Europe’s auto supply chain and could derail the transition to electric mobility (19). The groups called for urgent EU action to diversify sourcing, warning that the escalating constraints are already affecting production planning and long-term investment decisions (20).

Rewiring the future of REEs

China’s position in the rare earth supply chain highlights a growing point of structural vulnerability within the global economy, and nations are beginning to respond. India is brokering new mineral partnerships with Chile and Peru, pivoting decisively towards Latin America (21). Australia is recalibrating its position through direct engagement with China, highlighting that REE access is now a diplomatic priority as well as an economic one (22).

Within the CRMA, the EU is investing in recycling infrastructure and striking agreements to develop African mining capacity. And in the US, the Defense Production Act has been activated to support rare earth projects and reduce exposure to Chinese supply chains (23). But while the intentions are clear, the pace of transformation remains slow. Domestic mining faces legal, environmental, and social headwinds; refining capacity remains underdeveloped; and building fully sovereign supply chains may take a decade or more (24).

A path towards resilience

The rare earth standoff is a stress test for global economic resilience in the 21st century. Geopolitical tensions intensify and the demand for clean technologies accelerates, securing access to critical minerals is no longer a peripheral issue, but defines the features of strategic autonomy, industrial competitiveness and national security.

Governments and industries must act with urgency and coordination. Building alternative supply chains will require more than mere diplomacy, but demands environmental innovation, regulatory reform, and a willingness to absorb short-term costs for long-term gain. Rare earths may be buried deep in the ground but their influence spills over in global power. The nations that move decisively today will not only weather the disruptions to come, but will set the terms of tomorrow’s economy. Shall we?

This article is part of The Outside World, ftrprf’s very own research center.

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