Supply Control and the Global Trade War

Rare earth elements (REEs) may not dominate headlines like oil or gold, but they are the backbone of modern technology, green energy, and defense systems. For traders, understanding the strategic importance of REEs, who controls their supply, and how they fuel global trade tensions is essential for navigating market volatility and spotting opportunities.

In this post, we’ll break down why REEs matter, which countries hold the reins, and how their control shapes the escalating global trade war.

Why Rare Earth Minerals Matter

Rare earth elements, a group of 17 metallic elements including neodymium, dysprosium, and yttrium, are critical to industries driving the 21st-century economy. Despite their name, REEs are relatively abundant in the Earth’s crust, but their extraction and processing are complex, costly, and environmentally challenging. Their unique magnetic, luminescent, and electrochemical properties make them irreplaceable in:

• Technology: Smartphones, LED screens, and hard drives rely on REEs for high-performance components.
• Green Energy: Electric vehicle (EV) motors and wind turbine magnets depend on neodymium and dysprosium, with demand surging as nations push for net-zero emissions.

• Defense: Precision-guided missiles, radar systems, and electronic warfare equipment require REEs, making them national security assets.

The International Energy Agency projects a dramatic spike in REE demand under net-zero pathways, driven by EVs and renewable energy.

For traders, this rising demand signals potential price volatility and investment opportunities in mining, processing, and related tech sectors. However, supply chain vulnerabilities and geopolitical tensions add layers of risk.

Who Controls the Rare Earth Supply?

The global REE supply chain is heavily concentrated, with a few key players dominating production and processing:

• China: The undisputed leader, China controls 60-70% of global REE mining and over 80% of processing and refining. Its dominance stems from decades of strategic policies, including government subsidies, lax environmental regulations, and vertical integration of the supply chain.
• In 2024, China produced 90% of rare earth magnets, critical for EVs and defense applications. Beijing’s control extends beyond its borders, with investments in mineral-rich regions like Myanmar and Brazil.

• United States: The U.S. produces about 12% of global REEs, primarily from the Mountain Pass mine in California, but relies on China for 98% of its processed REEs. Efforts to bolster domestic production are underway, with the Defense Production Act and Biden’s infrastructure plan funding new projects.

• Australia: A key alternative supplier, Australia accounts for 12% of global supply in 2024, led by companies like Lynas Rare Earths, which operates a major processing facility in Malaysia. Canberra is positioning itself as a “trusted supplier” for Western nations.

• Canada, Greenland, and Others: Canada is scaling up production, with projects like Nechalacho targeting 5,000 tonnes annually by 2025. Greenland holds significant untapped reserves, including 18% of global neodymium and dysprosium, but faces regulatory and environmental hurdles. Emerging players like Vietnam, Brazil, and African nations (e.g., Burundi, Malawi) are gaining attention but lack the infrastructure to challenge China’s dominance.

This concentration creates a supply chain chokepoint, with China holding unparalleled leverage. Traders should note that disruptions in one region—such as Myanmar’s 2024 production halt—can trigger global price spikes.

Rare Earths and the Global Trade War

The strategic importance of REEs has made them a flashpoint in the U.S.-China trade war, with ripple effects across global markets. China has weaponized its dominance through export restrictions, as seen in 2010 when it halted REE shipments to Japan during a territorial dispute, causing a 97% price surge for dysprosium.

In 2025, China’s export bans on germanium, gallium, and antimony—key for defense and electronics—have escalated tensions, delaying deliveries and raising costs for Western firms. These restrictions, often in response to U.S. tariffs, require Western companies to submit product photos and buyer lists for supply clearance, adding friction to trade.

The U.S. is countering with tariffs and policies to reduce reliance on China. The Inflation Reduction Act and CHIPS and Science Act fund domestic mining and processing, while partnerships with allies like Canada, Australia, and Ukraine aim to diversify supply chains. For example, a 2025 U.S.-Ukraine deal supports Kyiv’s mineral development, though Russian occupation of 50% of Ukraine’s REE deposits complicates efforts.

The EU’s Critical Raw Materials Act targets 10% domestic mining and 40% processing by 2030, but faces hurdles like high costs and environmental concerns.

These moves signal a broader “resource diplomacy” race, where nations vie for control of critical minerals. China’s growing ties with Russia and investments in South America (e.g., Brazil’s 18.3% of global REE reserves) strengthen its position, while Western “friend–shoring” initiatives aim to build resilient supply chains. For traders, this geopolitical tug-of-war means heightened market volatility, with risks of supply disruptions and opportunities in alternative suppliers like Lynas or MP Materials.

Trading Implications and OpportunitiesThe REE market is a high-stakes arena for traders. Here’s what to watch:

• Price Volatility: Export restrictions or geopolitical flare-ups can cause sharp price spikes, as seen with dysprosium in 2010. Monitor China’s policy shifts and Western tariff responses for signals.

• Investment in Alternatives: Companies in Australia (Lynas, Iluka), the U.S. (MP Materials), and Canada (Cyclic Materials) are attracting capital as Western governments fund diversification.

• Recycling and Innovation: Urban mining and material substitution (e.g., magnet-free designs) are emerging but contribute less than 5% of supply. These could offer long-term opportunities if scalable.

• Environmental Risks: REE mining’s environmental toll, including radioactive tailings, faces growing ESG scrutiny. Companies with sustainable practices may gain a competitive edge.

Positioning for the Future :

Rare earth minerals are not just commodities—they’re geopolitical chess pieces shaping the global trade war. China’s dominance gives it leverage to disrupt markets, while the U.S. and allies scramble to build resilient supply chains. For traders, this dynamic creates both risks and opportunities. Stay ahead by tracking policy shifts, investing in diversified suppliers, and monitoring technological innovations that could reshape the market.