The Trump administration’s use of tariffs to escalate the trade war with China has captured global attention and pressured Beijing into tit-for-tat measures. But alongside tariffs, Beijing has deployed another economic weapon in its arsenal that could have a more powerful impact: its ability to control the global supply of rare earth minerals.
By restricting access to these critical minerals, China has the potential to do serious damage to the US defence industry and undermine the Trump administration’s wider reindustrialization ambitions. Ultimately, this could give Beijing a crucial strategic advantage in long-term US–China competition for military and technological supremacy and add to its existing manufacturing lead.
China’s stranglehold on rare earths
Despite President Donald Trump’s repeated calls for President Xi Jinping to reach out to secure a deal to de-escalate their trade war, Beijing has pledged to ‘fight to the end.’ In response to US tariffs, China has imposed restrictions on the exports of seven rare earth minerals, along with other products including permanent magnets.
China produces the vast majority of the world’s rare earth minerals, a group of 17 elements that are critically important for modern technology, from magnets to lasers to LCD screens.
Beijing controls almost 70 per cent of rare earth extraction and 90 per cent of rare earth processing globally. In contrast, while the US is the second largest producer with the seventh largest reserves, it falls far short of China’s output and relies on Beijing for imports. Washington excluded critical minerals from its global reciprocal tariffs, reflecting their importance to US interests.
This gives China a stranglehold over inputs into supply chains that are crucial to American primacy, from semiconductors to aircraft. For example, dysprosium is needed to heat-proof electric motors used in the US Air Force’s ‘fifth generation’ F-35 fighter jets, as well as for applications in robotics, drones, electric vehicles, and touch screens. Another important example is yttrium, which is essential for jet engines, precision lasers, and high-frequency radar. Both are among the seven rare earths restricted by Beijing.
China is leveraging its core role in supply chains from which the US has sought to exclude it – most notably semiconductors. The move sends a message: while the US might attempt to cut China off from the most advanced chips and other cutting-edge technologies, China could go one step further by cutting off the supply chain upstream.
Chinese exporters of the restricted rare earths have already reported a halt to shipments as they await licenses from the Chinese Ministry of Commerce, a system which gives Beijing the ability to regulate the flow of the minerals in the case of a protracted trade war.
In the long term, the US could try to build up its own extraction and processing operations, but this will take time and has a high financial and environmental cost. This would likewise be the case for other countries the US might seek to partner with.
US-China military competition
The restrictions on minerals could undermine the Trump administration’s broad ambitions to secure US primacy over China. These include the return of manufacturing to the US through a massive reindustrialisation programme, commitment to global leadership in emerging technologies such as AI, and a strategy to deter Chinese aggression towards Taiwan through overwhelming and regionally focused military power backed by a $1 trillion defence budget. Both reindustrialization and leadership in emerging technologies will be essential if the US is to deter China militarily in the coming decades.
Restricted access to China’s rare earths put these ambitions at risk. Long-term restrictions could have far-reaching effects on Washington’s defence industrial base and the global supply chains of machine tools and chips it relies on, including for AI and other technologies used in advanced military applications.
The US is also at risk of losing the race in competitive areas of defence and emerging technology. In some areas, such as hypersonic missile technology, China is already more advanced. In others, restricted access to minerals could prove crucial.
A key area of competition is over fighter aircraft. President Trump recently unveiled a commitment to develop the F-47, a new ‘sixth generation’ aircraft with advanced capabilities designed to supersede the US Air Force’s existing fighters. Meanwhile, two Chinese advanced prototype aircraft (the J-36 and J-50) have been observed on repeated test flights, indicating that China is developing similarly advanced aircraft.
A lack of critical minerals could ensure that China wins the race to deploy a ‘sixth generation’ fighter, which would be a significant milestone. China would be taking the lead in an area synonymous with US military dominance, one that could prove decisive in the long term.
China’s manufacturing lead
A technological lead is important. But in the event of a protracted US–China conflict the ability to sustain an adequate fighting force will be decisive. This is where industrial capacity matters – including sophisticated machine tools required for weapon production that rely on rare earths.
Even without restricting mineral exports, China already has a decisive advantage in manufacturing capacity. Strategists in Washington have voiced concerns about the vast ‘ship gap,’ with US intelligence estimating that China’s shipping production capacity is more than 200 times that of the US.
In a potential war, Beijing could replenish its stockpiles of munitions much faster than Washington. Meanwhile, China’s rate of military aircraft production is rapidly catching up with the US. Washington now risks facing a ‘fighter jet gap’ in which Beijing outproduces it in cutting-edge aircraft. Rare earth restrictions make closing these gaps even more difficult for Washington.