Many people don’t have the full picture of the rare earth crisis that’s been simmering for years, but it’s a massive issue with huge implications for technology, defense, and global trade. Let me break it down step by step, pulling together the key facts to show why this isn’t just about minerals - it’s about power, pollution, and geopolitics.
First off, rare earth elements aren’t actually rare. They’re found in deposits around the world, including in the United States. The real bottleneck is refining them into usable forms, and China has a near-monopoly on that, especially for heavy rare earths like dysprosium and terbium. Even rare earths mined in the U.S. have to be shipped to China for processing because no one else has the capacity or expertise at scale.
Outside China, only a couple of countries are making any headway in refining, but it’s limited. Japan and Australia are the main players, but they can only handle light rare earths, and even then, the costs are exorbitantly high due to stricter regulations and less efficient methods. For heavy rare earths, they’re still dependent on imports from China, which keeps the world hooked on Beijing’s supply chain.
The United States does have some rare earth stockpiles to tide over short-term shortages, but building independence is a slog. In recent months, there’s been buzz about the CIA ramping up efforts to chip away at China’s edge by smuggling rare earths out of the country, recruiting Chinese technicians skilled in refining, and trying to snag or copy China’s specialized equipment. Based on how fired up Trump seems about the whole thing, those operations haven’t been very successful - China’s got tight controls in place.
China isn’t just restricting exports of the raw rare earths; they’re also clamping down on exporting the refining equipment itself. On top of that, they’ve got rules for foreign companies using Chinese rare earths: you can’t sell products containing those materials to buyers who haven’t been greenlit by China. Break that, and you’re cut off from future supplies. It’s a smart way to extend their influence beyond just the minerals.
These rare earths show up in all sorts of critical industries, making any disruption a nightmare. In the military sector, they’re essential for U.S. gear like the F-35 fighter jets and nuclear submarines, which rely on them for high-performance components. The auto industry is heavily dependent too - both new energy vehicles (NEVs) like electrics and traditional oil-powered cars need rare earths for motors and other parts. Ford came close to shutting down production during the last crisis because of shortages. Chips are another big one: specific elements like dysprosium and terbium are key in manufacturing, and under Chinese regs, even TSMC has to get approval from Beijing before selling chips to the U.S. ASML has already reported delays in deliveries due to these new restrictions. Then there’s aerospace and wind power, where rare earth materials are used in aircraft engines and wind turbine blades to handle extreme high temperatures.
Looking ahead, even under the most optimistic scenarios, it could take the U.S. and its allies a full 10 years to build out their own complete rare earth supply chain from scratch. But given the ongoing decline in Western manufacturing capabilities, some say it might never happen without a massive overhaul - it could take forever.
China’s stranglehold on the rare earth industry isn’t solely due to abundant mines or advanced tech - it’s also because they’ve been willing to endure massive pollution. They’ve adopted a “pollute first, clean up later” approach, which has given them a huge head start while the West balks at “getting dirty” due to environmental concerns. Even with strong policy pushes, the U.S. and Europe would need 5-10 years to rebuild a compliant, profitable full supply chain. This isn’t a scramble for market dominance; it’s all about the timeline to break free from China’s grip on the rare earth supply chain. But now, China’s competitive edge in environmental leniency is currently being challenged by Pakistan, which is seeking closer ties with the United States through proposals to develop a port in Pasni, located approximately 70-100 miles from the China-leased Gwadar Port, and by exporting rare earth minerals to the U.S. under a $500 million deal initiated in September 2025. This development occurs amid China’s imposition of rare earth export restrictions as a form of sanction against the U.S., raising questions about the durability of the longstanding Sino-Pakistani alliance often referred to as the “iron brothers.”.
Finally, the numbers lay it bare: When it comes to refining capacity for rare earth minerals, the U.S. has 0%, China controls over 90%, and the rest of the world scrapes by with less than 10%. To make matters worse, Trump has already antagonized or sanctioned most of the countries in that “rest of the world” category that have any refining chops, narrowing options even further.
