Executive Summary
The term ‘Critical Minerals’ is generally used to refer to a group of minerals that have come to be an essential part of almost all facets of life. These REEs are used most extensively in the production of permanent magnets, which in turn are used to make mobile phones, televisions, wind turbines, solar panels, jet engines and even fighter jets and missiles. This is a sector where China dominates the supply chain from mining to refining. In April, China restricted the export of seven rare earth metals (Jackson, 2025), the latest in a broader set of measures since 2023 aimed to flex its control over this critical resource. The move has led to panic in the global auto industry, with some warning of outages if supplies are not restored and has sent them scrambling to secure alternative supply sources (Amaan et al, 2025). This brief examines China’s present dominance in this sector and why breaking this monopoly is difficult despite Western efforts to reduce China’s present dominance in this sector.
Analysis
China’s dominance in the critical mineral sector is deeply entrenched, while it has an abundant amount of its own reserves to mine, even the deposits where these minerals are mined in other countries have to ship them to China for their refinement and processing, a technically difficult and environmentally costly process. For instance, China holds around 10 per cent of the world’s lithium, cobalt, nickel and copper but imports and controls the processing of 65 to 90 per cent of the global supply of these metals. This is even higher in the case of graphite, where China produces around 70 per cent of the world’s share but processes an astonishing 99 per cent (Baskaran and Wood, 2025). In April 2025, shortly after President Donald Trump announced his first set of tariffs, Beijing retaliated by restricting the export of seven Rare Earth Elements (REEs). Importantly, a simultaneous announcement was made placing 16 U.S entities on the export control list, and all but one of these are involved in the defence and aerospace industries (Baskaran and Schwartz, 2025). These moves are aimed at displaying to the U.S that China is willing to weaponise its dominance in the critical minerals supply chain, a move that will lead to severe consequences given the prevalence of these minerals in critical technologies like semiconductors, renewable energy sources, fighter jets and missiles. The seven minerals which were targeted by the export curbs are classified as heavy REEs, a sub-category of critical minerals where China’s share of the global processing stands at 99 per cent (Baskaran and Schwartz, 2025). Key U.S platforms use immense amounts of rare earth elements; the F-35 needs over 900 pounds, each Arleigh Burke class destroyer needs 5,200 pounds, and a Virginia class submarine needs over 9,200 pounds of these elements (Lopez, 2024).
The curbs on the export of the REEs, crucially, extend to all countries and are not a U.S.-specific measure. This is likely aimed at incentivising other states, particularly those which are seeking to balance their relationship between China and the U.S to seek favourable terms from Beijing on its still-evolving licensing regime for these minerals. As for the West, the U.S has recently begun investing in its domestic capabilities, but existing measures are unlikely to offset China’s dominance in this sector. The U.S has recently backed MP Materials to begin the light rare earths separation and a heavy rare earth processing facility, but even when complete, these facilities will only be able to produce 1,000 tons of neodymium-boron-iron (NdFeB) magnets compared to the 138,000 tons that China produced in 2018. More recently, in 2024, MP Materials announced a record production of 1,300 tons of neodymium-praseodymium (NdPr) oxide, China announced an estimated 300,000 tons of NdFeB magnets that same year (Baskaran and Schwartz, 2025). U.S efforts to develop a domestic ‘mine-to-magnet’ chain are still at an early stage of operation, and it will take time and continued investments to ensure that the operations scale to a commercially viable level.
An alternative strategy would be to partner with ‘mineral allies’, countries which have the deposits or processing facilities for these minerals, to create alternative supply chains, but here too, cutting China out would be difficult, given its vast advantage in technical know-how and the technologies needed to process these minerals effectively. The process of setting up such partnerships is further complicated when considering that the ‘liberation day’ tariffs that the Trump administration has imposed, including on some of Washington’s closest allies, are still in effect. Finally, should tensions between the U.S and China escalate to armed conflict (particularly over Taiwan), there is a real chance that China will weaponise its dominance over critical mineral supplies to handicap the U.S defence industrial base. Should such a situation arise, the U.S may run out of critical munitions as early as within a week of hostilities breaking out (Jones, 2024). The new licensing regime allows China to control how much of these minerals are exported and to whom, greatly enhancing Beijing’s ability to limit the quantities of these minerals that the U.S can stockpile.
Beyond the U.S, the global economy is already faced with the task of preparing for and dealing with what might be the next supply chain crisis. The auto industry is already facing production outages (Amaan et al, 2025), and if the issue is not resolved, it might cause further economic pain. The renewable energy industry will also come under pressure, given that many of these minerals are key components in technologies like solar panels and wind turbines.
Conclusion
China’s dominance of the critical mineral supply chain is the result of decades-long, state-guided investment in mining, processing and technological expertise. This dominance is increasingly turning into a tool for China to use as geopolitical leverage, particularly in its disputes with the U.S. While there is a growing consensus that the supply chain must be diversified, policymakers and governments must realise that the real policy thrust must be aimed at setting up processing units and not a single-minded focus on finding new deposits. Without a coordinated and sustained strategy focused on technology sharing, infrastructure financing and resolution of trade tensions, even a partial move away from the present Chinese dominance of the critical mineral supply chain will be difficult. As global economic tensions grow, addressing the world’s strategic dependence on China in this crucial sector is both an economic necessity and a national security Imperative.
References
Amann, C., Carey, N. and Hall, K. (2025). Auto companies ‘in full panic’ over rare-earths bottleneck. Reuters. [online] 9 Jun. Available at: https://www.reuters.com/business/autos-transportation/auto-companies-in-full-panic-over-rare-earths-bottleneck-2025-06-09/.
Baskaran, G. and Schwartz, M. (2025). The Consequences of China’s New Rare Earths Export Restrictions. [online] CSIS. Available at: https://www.csis.org/analysis/consequences-chinas-new-rare-earths-export-restrictions.
Baskaran, G. and Wood, D. (2025). Critical Minerals and the Future of the U.S. Economy. [online] Centre for International and Strategic Studies, pp.1–9. Available at: https://csis-website-prod.s3.amazonaws.com/s3fs-public/2025-02/250210_Baskaran_Critical_Minerals.pdf?VersionId=Tfu2TnNrQGlN7ol8HSCakMUT8HTwYukd
Jackson, L. (2025). China’s rare earth exports grind to a halt as trade war controls bite. Reuters. [online] 11 Apr. Available at: https://www.reuters.com/markets/commodities/chinas-rare-earth-exports-grind-halt-trade-war-controls-bite-2025-04-11/.
Jones, S.G. (2024). The U.S. Industrial Base Is Not Prepared for a Possible Conflict with China. [online] features.csis.org. Available at: https://features.csis.org/preparing-the-US-industrial-base-to-deter-conflict-with-China/.
Lopez, T. (2024). DOD Looks to Establish ‘Mine-to-Magnet’ Supply Chain for Rare Earth Materials. [online] U.S. Department of Defense. Available at: https://www.defense.gov/News/News-Stories/Article/Article/3700059/dod-looks-to-establish-mine-to-magnet-supply-chain-for-rare-earth-materials/.