The Biggest International Blunder in a Generation: China won the rare earth metal race
The Trump Administration’s trade war with China was marked by headline-grabbing tariffs and bold rhetoric, but what it lacked was a comprehensive understanding of China’s structural leverage—most crucially, in the realm of rare earth minerals. These minerals are indispensable to modern manufacturing, especially in the production of electric vehicles, semiconductors, smartphones, and military technology.
China, accounting for over 90% of the world’s rare earth processing capacity, strategically tightened its grip on exports. Despite a temporary easing in May 2025, the country continues to restrict access, which has created acute supply chain vulnerabilities for the United States. These constraints are now reverberating across U.S. industries, threatening production lines in everything from EVs to national defense systems.
The roots of this dependence trace back to a broader geopolitical miscalculation. The United States, under the first Trump Administration, adopted a more isolationist stance—retreating from engagement in many global regions where rare earth reserves are found. Instead of forging partnerships or investing in extraction and processing infrastructure abroad, the U.S. narrowed its foreign policy scope. Meanwhile, China was doing the opposite: securing mining rights in Africa, Southeast Asia, and South America, and building out processing capabilities at home.
This trend did not reverse under the Biden Administration. While some efforts were made to rebuild alliances and invest in domestic capability, the structural vulnerabilities inherited from the prior administration persisted. The continuation of key policies and a lack of coordinated international resource strategy meant that the U.S. remained largely reactive rather than proactive in the rare earths domain.
This asymmetry of strategic foresight has now crystallized into economic vulnerability. While the U.S. scrambles to bolster domestic supply—like the MP Materials project at Mountain Pass—it remains years away from any meaningful independence.
This dynamic is playing out in high-stakes corporate rivalries. Tesla finds itself constrained by material shortages, while China’s BYD scales production with fewer constraints. Apple must navigate increasingly fraught supply lines while Huawei enjoys a home-field advantage with better access to critical inputs.
The ramifications extend beyond tech and automotive. The construction sector and broader manufacturing base are also bracing for impact. Rare earths and associated minerals are essential in everything from power tools to renewable energy infrastructure. With constrained supply, these sectors may face persistently elevated tariffs and extended lead times for key components, adding cost pressures and project delays across the board.
In light of these pressures, companies that rely on critical materials must adopt more proactive procurement strategies. Chief among them is the importance of locking in long-term contracts to stabilize supply and pricing. Where possible, firms should consider establishing strategic reserves—not just domestically, but also in nearby, geopolitically stable countries such as Canada. These measures can help buffer against geopolitical shocks and offer greater continuity in operations.
What we’re witnessing is not just a commodities squeeze—it’s a structural business war, engineered in part by deliberate Chinese strategy and exacerbated by American missteps. The long-term implications will define the next era of global economic competition.
Resolving these challenges—and others tied to global trade—requires a recalibrated approach to U.S.-China relations. Any sustainable agreement must move beyond tactical concessions and recognize the profound interconnectedness of these two great powers and their critical roles in the global economy. Without such acknowledgment, future policy will remain reactive and fragmented, unable to navigate the complexities of modern economic interdependence.