The Rare Earth Factor: How China’s Control of Strategic Resources Affects Relations with the US

The issue of control over rare earth elements is increasingly affecting relations between the US and China. During a recent meeting in China, Chinese leader Xi Jinping and US President Donald Trump avoided making loud statements on the topic. Such restraint contrasts sharply with the events of last year, when the restoration of supplies of rare earth magnets actually became the main goal of the American side’s negotiations.

This is reported by Bloomberg. The publication notes that the topic of critical minerals remained key during the summit, even despite the laconicism of both sides. Analysts believe that it is China’s dominance in the field of rare earth resources that provides Beijing with a significant strategic advantage in relations with Washington.

Rare earth elements are of critical importance for modern industry and the defense sector. They are used in the production of F-35 fighters, Virginia-class submarines, electric vehicles, and a wide range of high-tech products. According to Bloomberg Economics, the sectors of the American economy that depend on these materials account for about 4% of US GDP, equivalent to about $1.2 trillion.

That is why China has gained a powerful tool for political and economic influence. Last year, the Trump administration was even forced to abandon extremely high tariffs on Chinese goods in order to restore the supply of rare earth materials. The US dependence on these resources has become so obvious that at one point Ford was forced to temporarily stop production due to depletion of stocks of necessary components.

After that, Washington intensified a large-scale campaign to reduce dependence on China in the field of rare earth metals. According to Bloomberg Intelligence, this year alone, about $10 billion in public investment is planned in the world to develop mines, processing plants and specialized factories.

One of the key projects has been the development of rare earth processing outside China. In a large industrial complex in Malaysia, Lynas Rare Earths is increasing production of so-called “heavy” rare earth elements. They have become one of the main tools of pressure from Beijing during last year’s trade war.

At the Malaysian complex, ore coming from Australia undergoes a complex chemical separation process. Bloomberg emphasizes that this is an extremely expensive and technologically complex direction that requires many years of research and significant investments. Chinese metallurgists and chemists have spent decades to achieve the current level of dominance in this industry.

Analysts believe that a noticeable weakening of China’s influence on the global rare earth elements market is possible only at the beginning of the next decade. Even according to the most optimistic forecasts, in 2030 Beijing will still remain the main force in this sector, which significantly limits the US’s ability to maneuver in relations with China.

Against this backdrop, Donald Trump is forced to act much more cautiously in his contacts with Beijing ahead of a new meeting with Xi Jinping, which, according to Bloomberg, may take place at the White House as early as September. That is when the current trade truce between the two countries will expire.

Additional concern in Washington is caused by signals from China about the possibility of introducing export controls on trade in rare earth elements even beyond its own borders. According to experts, such a prospect could pose a serious challenge to global production chains and further aggravate US-China relations in the coming years.