Taipei, Taiwan – As United States President-elect Donald Trump prepares for a second trade war with China after he takes office on January 20, rare earth minerals essential to the production of electronics, vehicles and weapons are one of the resources expected to be included in the fray.
While rare earths are abundant on Earth’s surface—despite what their name suggests—China controls about 70 percent of their production and 90 percent of their processing, according to estimates by the US Geological Survey and the International Energy Agency.
The 17 elements, which include scandium, promethium and yttrium, are used to make everything from smartphones, semiconductors and batteries for electric vehicles, to F-35 fighter jets, drones, wind turbines, radar systems and nuclear reactors.
The vulnerability of rare earth supply chains is a growing concern for governments around the world in an era of heightened geopolitical tensions.
Last month, China banned exports of gallium, germanium and antimony to the US after President Joe Biden’s administration announced the latest restrictions on the country’s sales of advanced chips and machinery.
Many saw the move as symbolic because the US has other sources of gallium and germanium.
But it still marked an escalation in Beijing’s use of rare earths as a tool for geopolitical advantage after it declared rare earths state property in October and banned the export of technologies used to extract and separate the material late last year.
He also recalled the Chinese government’s decision in 2010 to briefly ban exports of such minerals to Japan amid a maritime border dispute between the sides.
With Trump promising to impose a range of new trade restrictions on China – ranging from 10 percent tariffs on Chinese goods for Beijing’s failure to curb fentanyl exports to 60 percent tariffs for unfair trade practices – Beijing could further restrict rare countries to respond in species.
Even if the Chinese government doesn’t retaliate with an export ban, Trump’s tariffs would potentially make minerals much more expensive to source.
“Looking ahead 12 to 18 months, the global geopolitical landscape is full of wildcards that could significantly impact the outlook for supply chains and the economies they serve in an instant,” Ryan Castilloux, rare earth specialist at Canadian research and consulting firm Adamas Intelligence, they told Al Jazeera.
Washington is particularly concerned about rare metals such as neodymium, praseodymium, dysprosium and terbium, Castilloux said, which are used to make powerful neodymium magnets — also known as NdFeB magnets.
Rare earths and finished products such as rare earth magnets, which are many times stronger than standard magnets, are considered “a vulnerability for US manufacturers and the defense industry” because the US and its allies have yet to develop an alternative source other than China, Castilloux said, although mineral production projects underway elsewhere, including three US states and Estonia.
Washington has made the establishment of a “sustainable supply chain from ores to magnets” a top priority.
In March, Danielle Miller, acting deputy assistant secretary of defense for industrial base resiliency, said efforts to build such a pipeline that could support all U.S. defense requirements by 2027 were “well on track.”
Despite large reserves of rare earths in a number of countries, from Angola and Australia to Brazil, Canada and South Africa, expanding the supply chain beyond China is a challenging undertaking.
China has been able to maintain its dominance in the industry thanks to its economies of scale, government subsidies and amassing huge inventories that have allowed it to undercut rivals with “irrationally low prices,” said Neha Mukherjee, senior key minerals analyst at Benchmark Mineral Intelligence.
Rare earths are by-products of the mining of other minerals such as iron ore and are not produced in predictable quantities. As a result, the quantities and thus the prices of different rare metals can vary widely among the 17 minerals.
Mukherjee said China is focused on keeping rare earth prices stable to support its domestic electric vehicle industry, even if it comes at the expense of the mining sector.
China’s near-monopoly and unbeatable prices have historically made operating rare earth mines and processing facilities an unattractive proposition for many investors.
“They discourage anyone from becoming competition. Mine development is simply not economically viable when you can buy semi-finished materials at a competitive price,” Mike Walden, senior director of TechCet, a consultancy specializing in electronics supply chains, told Al Jazeera.
The timeline is also long, taking 10-20 years from research to construction, Walden added.
A watershed moment for America’s efforts to secure rare earth supplies was the reopening of the Mountain Pass Mine in California’s Mojave Desert – first discovered in the 1870s – by MP Materials in 2018.
The company has since opened a magnet plant in Texas.
Other rare earth-related facilities outside of China include a mine in Yellowknife, Canada, a magnet recycling facility in the US state of Texas, and a rare earth magnet plant in the US state of South Carolina, with more projects under development across North America.
Since 2022, the US Department of Defense and the Department of Energy have awarded more than $440 million to rare earth companies, in addition to tax credits provided by the Inflation Reduction Act.
Such projects could help the U.S. weather the storm if China ends rare earth exports, although the country may still struggle to achieve full self-sufficiency, Walden said.
“The key thing here is that there are operational facilities in North America. Is that enough to necessarily support all North American demand? The answer to that is no. Is it enough to support North America’s strategic demand? The answer to that seems to be yes,” he said, referring to Washington’s priority areas such as defense and energy.
Although mines have opened or reopened outside China, rare earth minerals are still being shipped there for processing in many cases, analysts say.
China controls 99 percent of the processing of heavy rare metals, a subset of rare metals that are less common but still key to the production of electric vehicles, wind turbines and fiber optic cables.
North America is not the only region trying to catch up. In January, Brazil’s first rare earth mine in Serra Verde opened for commercial production after 15 years of development.
Europe has rare earth processing facilities in France, Estonia and Germany, but has yet to open mines despite vast rare earth deposits in Sweden, Finland, Norway and Spain.
Australia also has significant mining and processing facilities in operation, with the government investing hundreds of millions in further development.
Benchmark Mineral Intelligence’s Mukherjee said such initiatives are still not enough to reduce dependence on China.
“There is an urgent need for a circular economy. There is a great need for recycling facilities. There is a huge need to develop midstream and upstream processing facilities in the US and a lot of funding should be diverted that way,” she said.
Part of the reluctance – especially in Europe – has been due to the environmental costs associated with mining and processing rare earths, including the separation and disposal of radioactive materials from uranium and thorium.
Mining and processing produce large amounts of waste rock and can release residual concentrations of rare earths, radionuclides, heavy metals and acids into the surrounding air, soil and groundwater, according to a 2021 Canadian study.
Australia’s Lynas Rare Earths, the largest rare earth processing company outside of China, was the subject of major protests in Malaysia in 2019 over toxic waste produced by its rare earth processing facilities there.
Analysts say some of those concerns could be overcome with new technology and automation to meet the higher environmental standards demanded by many governments, but that would take time and money.
The industry, ironically, could get a further boost if Beijing blocked its exports, said Adamas Intelligence’s Castilloux.
“The last time China restricted exports of rare earths, it resulted in years of demand destruction as many end users looked to reduce their consumption or switch to alternatives in the coming years,” he said.
“Restricting magnet exports, even if short-lived, would likely increase government investment in alternative supply chains at home and abroad.”
With days until Trump re-enters the White House, there is considerable uncertainty about how he might approach the rare earth industry.
During his first term as president, he issued an executive order declaring rare earths a national emergency because of the U.S.’s reliance on a “foreign adversary” to acquire them.
Trump is widely expected to roll back environmental regulations that create barriers to opening and operating mines, but he has also voiced opposition to key funding initiatives such as the Inflation Reduction Act and the bipartisan Infrastructure Act.
Some analysts have expressed concern that Trump could invoke the International Emergency Economic Powers Act to impose tariffs on imports of minerals such as rare earths, or direct the Commerce Secretary to open a Section 232 investigation into the national security implications of such imports, such as did for aluminum in 2018, despite their critical importance to the economy.
In the meantime, the industry is preparing for the bumpy road ahead, Walden said, and stockpiling resources accordingly.
“There were preparations. Everyone expects, not cooling, but actually further escalation. So, good for good: retaliation, next step, retaliation, next step,” he said.
