China’s Rare Earth Weapon: How Beijing Turned Supply Chains into Statecraft

This briefing examines China's resource endowments and how the state has used its supply of rare earth minerals to enhance its position as a global power. China's controls on exports, foreign policy direction and its relationship with the US and Europe are explored throughout. This article was written by Martin Makelov and edited by Tanvi Sureka.

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Background: China’s Monopoly by Design

Rare earth minerals are 17 elements with similar properties, which, despite their name, are abundant throughout the globe. However, the process of extracting and refining them is extremely costly and complicated, as well as dangerous for the environment. They are critical for various industries like consumer electronics, clean energy technologies (e.g. wind turbines and EVs), as well as advanced defense systems such as radars and guided missiles. China has a little over a third of global reserves of these minerals, with Brazil, Vietnam and Russia also possessing significant reserves. China, however, exercises a near-monopoly on the rare earth market, controlling over 90% of global refining capacity. Beijing has achieved this dominance through a deliberate, decades-long strategy, and currently, no other nation can match China’s ability to process rare earth minerals. Western countries are highly dependent on imports of rare earth minerals from China, which they need for many critical modern industries, ranging from EV motors to military tech like the F-35. For years, this dependence has been noted by industry leaders as a potential national security risk, but so far there had been little willingness in the EU and the US to actually decouple from China, due to the extremely high costs needed to establish new supply chains. While the first Trump administration and the Biden administration recognised the issue and signed legislation to diversify, no real progress has been made in reducing the dependency.

From Leverage to Weapon

China’s recent export control actions, however, have revealed the danger of the west’s complacency. On April 4, 2025, Beijing imposed licensing requirements for the export of seven rare earth minerals in retaliation to President Trump’s “Liberation Day” tariffs. This unprecedented move disrupted global supply chains and prompted fear of shortages in the auto industry in Europe and the US. Ford’s CEO, for example, claimed that the disruptions caused the company to shut down several of its factories.

In response to Beijing, the Trump administration pleaded for the restrictions to be lifted and declared a truce in its trade war with China, significantly lowering tariffs. China did relax its export controls, but it blocked companies from stockpiling rare earths, trying to maximise its leverage over the west. This recent episode and Trump’s quick reversal revealed that China held the cards in any future trade negotiations with Washington. In October, Beijing went much further by instituting new sweeping export controls on rare earth minerals ahead of the summit between Xi and Trump in Busan. At Busan, export controls again became a central issue – China agreed to pause their expansion for one year, in return for the US dialing back tariffs and semiconductor restrictions. The Trump administration touted this as a “win”, but it is not even a return to the baseline – at best, it gives China more time to build up its bureaucratic and economic capacity to reimplement the export control regime in time for the 2026 Midterms. Before “Liberation Day”, rare earth exports were not seen as a bargaining chip in trade negotiations. Now that the cat is out of the bag, Beijing has discovered that they are an efficient weapon against an unprepared US and Europe.

The Stakeholders

This recent development has finally led to a sense of urgency among western policymakers. In October, the US and Australia agreed to invest more than $3 billion in critical mineral projects for the next six months, while the US and Japan have started jointly developing mining capabilities in the Pacific. This December, Washington also enlisted those two countries, along with Singapore, South Korea, and Israel into the “Pax Silica” coalition – a bloc aiming to counter China’s dominance in this sector. This new multilateral initiative underscores the massive threat from China which the Trump administration recognises by now. The administration is also seeking to expand the grouping to include more countries with mineral resources. US officials say that China’s dominance in rare earths is coming to an end, with Treasury Secretary Scott Bessenet stating that self-sufficiency could be achieved in 24 months. This claim is highly dubious, however. The shortest typical timeline for establishing a rare earth project, from exploration to financing and construction, is around six years. Additionally, any new plants would struggle to compete financially with cheaper Chinese exports. In the short term, the US remains highly vulnerable to Chinese export controls and has little ability to disrupt the supply chain.

In comparison with the US, Europe faces an even more urgent threat from Chinese export controls. Both the EU’s rearmament plan, and its Green and Digital Transition (on which much of the EU’s economy is structured around) rely heavily on rare earth minerals. According to local officials, the EU is much more reliant on China (with almost all of their mineral imports coming from there) than it was on Russia before the invasion of Ukraine, with Beijing having the potential to shut down Europe’s green economy. There are goals to reduce dependence on China, but so far, the EU has no operational rare earth mines and only two processing plants, and new developments are constrained by environmental protections. The increasing tensions with Russia further Europe’s problems, as a lack of minerals will prevent powers like France, the UK and Germany from rebuilding their militaries.

Beijing’s Calculus

For Beijing, the export controls have proved much more effective than previous sanctions and punitive measures against the west. By restricting access to its facilities and expertise, China can impose very high costs to its adversaries and gain favourable trade terms. Some analysts, however, warn that China might be overplaying its hand by pursuing these aggressive measures, which are already pushing the west to decouple. While Beijing has immense leverage right now, in the long term it could lose its market share due to the establishment of alternate sources. “Middle powers” in this market – like Brazil, Australia, Canada and several African producers – could disrupt China’s monopoly as Washington and Brussels begin to court them.

The rare earth crisis reflects not only a supply chain vulnerability, but also the end of a particular worldview in relations with China. Western policymakers, believing in the power of the market and free trade, allowed their corporations to outsource manufacturing to China to get higher profits. Free trade created dangerous asymmetries which were ignored for years, as politicians were unwilling to pay the economic and environmental costs of establishing new supply chains and did not fully consider national security implications.

For Beijing, rare earths were never just another commodity. Since Deng Xiapong’s remark in 1987 that “The Middle East has oil, China has rare earths” Chinese leaders have treated them as a strategic asset. In fact, the first warning came in 2010, when China briefly halted mineral exports to Japan amid a diplomatic row, causing the latter to start diversifying. What has changed in 2025 is not China’s basic strategy, but its willingness to now openly weaponise these resources against the west. The export controls in April and October were the natural next steps in China’s long game to gain leverage over the west, and they are likely to become a permanent feature of its trading strategy from now on. Strong parallels can be drawn with the Oil Crisis in the 1970s, when Arab states realised that consumers had built an entire growth model on the assumption of cheap oil, and used embargoes and price hikes to rewrite the terms of interdependence and increase their economic power. Rare earth minerals today are arguably just as crucial as oil was, due to their role in the green transition – in fact, the IEA estimates that demand will grow 4 to 6 times by 2040 as renewable energy scales globally.

What Comes Next

Looking ahead, the rare earth mineral tensions reflect a drift towards “win-lose globalisation”, where states use their control over supply chains to extract concessions and weaponise interdependence. We could see the creation of two rival blocs, with a Chinese dominated sphere on the one side, and a loose coalition of mineral “Middle Powers” grouped together with Washington and Brussels. A return to the status quo of the 2010s is highly unlikely, as Beijing has eroded its trust with the west. Additionally, protectionist policies have become mainstream in many western countries and there is bipartisan consensus in the US on the need to decouple. In the next several years, however, the west will keep being dependent on China. Its best strategy for now would be to use frameworks like Pax Silica to cooperate against Beijing’s trade practices, while wielding export controls for sectors like advanced microchips, in which Washington is still ahead. The Trump administration, despite the President’s usual “America First” rhetoric, seems to recognise the fact that it cannot hope to achieve mineral security by acting alone. It will be crucial for Washington to turn Pax Silica into a cohesive bloc, and to start repairing its trade relationships with major partners, if it wants to be more prepared when China threatens to restrict exports again. Disunity between Brussels and Washington on this issue will exacerbate everybody’s national security and only cede more ground to China.

In conclusion, the era when western leaders could ignore their vulnerability over rare earth minerals is over, with implications for the west’s national security and its green transition. Decarbonisation initiatives and the EU’s rearmament plan will assume a new dimension as states try to secure mineral supply chains and trade restrictions become a valid tool of statecraft.