Governments Commit $10 Billion to Loosen China’s Rare-Earth Grip

China’s leverage lies less in rare-earth rocks alone than in the industrial chemistry and magnet capacity that turn those rocks into critical parts for modern manufacturing and defense.

Rare earths matter because they sit inside high-performance magnets. Those magnets help make phones, wind turbines, electric vehicles, missile systems, and other technologies smaller, lighter, more powerful, and more heat-resistant. Nectar Gan describes rare earths as “the backbone of modern technology”: 17 chemically similar metallic elements whose value is often realized only after difficult separation, refining, and magnet production.

The strategic problem is that the supply chain is not merely China-heavy at the mining stage. China has major deposits and dominates processing, refining, and sales into a global system built around Beijing. Joe Deaux says China accounts for “80 to 90%” of rare-earth production and processing used in equipment globally. International Energy Agency data presented by Bloomberg put China at 91% of rare earths production, compared with Malaysia at 5%, others at 3%, and the US at 1%.

The deeper choke point is refining and magnet production. Gan says China controls 90% of the refining process and about 90% of magnet production. A later IEA-attributed chart put China at 94% of magnet production and 91% of rare earth production. Martin Ritchie says China’s magnet capacity is “vast compared to the rest of the world.”

That distinction matters because mining ore is only the start. The difficult work is chemical: separating and refining individual elements into forms magnet makers can use. The process is costly and environmentally damaging, producing toxic waste, including radioactive materials. For years, Western countries were largely willing to let China absorb those costs. Ritchie adds that consumers were “happy with the status quo” because China supplied magnets cheaply and reliably for many years.

When ? donald-trump returned to the White House in 2025 and restarted the US-China trade war, China responded with export controls on rare earths. Trump is heard saying, “We need rare earths.” The pressure point was not abstract resource insecurity; it was a specific manufacturing dependency tied to permanent magnets.

The immediate pressure came from the auto sector. Joe Deaux says automotive executives in Detroit told Trump that if rare-earth magnets could not move back into the United States, factories would have to start shutting down. Bloomberg news graphics around the wider tariff escalation included an April 2025 note that China capped tariffs on US goods at 125% after Trump imposed very high tariffs on Chinese imports.

The argument is not that rare earths alone determined the trade war. It is that Beijing had a targeted instrument that could bite inside Western manufacturing faster than broad tariff pressure. The automotive sector’s alarm made the dependency visible: without the magnets, production lines risked stopping. Deaux frames the issue as “not letting one country hold all the chips on what is a very important supply chain.”

China had already demonstrated this tool. Nectar Gan says China first used its dominance over rare earths as a geopolitical weapon in 2010, restricting exports to Japan during a territorial dispute. The New York Times and Bloomberg headlines from that period described China halting rare-earth trade with Japan and the risk to Japanese technology. Deaux says China effectively told Japan it would restrict exports of the rare earths Japan needed for permanent magnets used in automotive and other industries.

That episode lasted only weeks, but it was the first major market shock. Gan says the Trump administration should not have been surprised because China had used the same leverage 15 years earlier.

China was not always the dominant player. Nectar Gan says the US was the biggest rare-earth player from the 1950s through the 1980s, while China was a latecomer that caught up rapidly. Beijing treated rare earths as a strategic industry and built capacity throughout the chain.

Gan quotes Deng Xiaoping’s line: “The Middle East has its oil, but China has its rare earths.” The point is not only resource endowment, though China has the largest discovered rare-earth deposit and important heavy rare-earth deposits. It is industrial strategy. China built processing capacity, magnet-making capacity, and technical competence while Western producers faced thin margins, higher labor costs, and dirty processing economics.

US Geological Survey figures presented by Bloomberg listed rare-earth reserves in million metric tons: China at 44, Brazil at 21, Australia at 6, Russia and Vietnam at 4 each, and the US at 2. Gan notes that the US has “very, very little” heavy rare earths. Heavy rare earths are among the most expensive and sought-after because they help high-performance magnets resist heat and demagnetization.

The result is a dependency that can appear at multiple points. Joe Deaux says that wherever a manufacturer is in the world, at some level of the supply chain it is probably reliant on Chinese products.

The most advanced non-Chinese rare-earth processing site described is Lynas’s facility in Gebeng, Malaysia. The Australian company has a $96 million contract to supply heavy rare earths to the US Department of Defense. Lynas aims to produce more than 10,000 tons of rare-earth oxides per year at the site and, more importantly, has worked out how to produce heavy rare earths.

Amanda Lacaze of Lynas says the company “broke the monopoly on separated heavy rare earths” in May 2025 and is the only scaled producer outside China of both separated light and separated heavy rare earths. Martin Ritchie calls Lynas the leader among companies trying to rebuild the rare-earth supply chain outside China, but notes that it started more than a decade ago and took a long time to ramp production.

The constraint is not just capital equipment. Lacaze points to a skills gap: in the US last year, she says, 35,000 lawyers graduated, compared with 350 mining engineers. China, by contrast, has a dedicated China University of Mining and Technology described as having 25,000 undergraduate students. Lacaze’s broader point is that China invested in competence in rare earths and continues to become more efficient.

Defense demand adds urgency. The US military’s exact demand for rare earths is classified, but Nectar Gan says the US has been burning through defense and weapons stockpiles quickly and will need rare earths to replenish them. Bloomberg cites a Center for Strategic and International Studies estimate that during the Iran war the US used more than half of its pre-war inventory of some expensive munitions. The point is not the inventory math itself, but what replenishment requires: weapons and defense systems need rare earths.

He Yongqian presents China’s restrictions differently. On China’s ban on exports for use in US weapons, she says the objective is to prevent illegal diversion of rare earths toward improper uses, including weapons of mass destruction. China’s restrictions on rare-earth exports to the US have been relaxing, but the weapons-use ban remains a red line.

Brazil is one of the main bets for new deposits. US Geological Survey figures put Brazil at 21 million metric tons of rare-earth reserves, roughly a quarter of the world’s rare earths as described by Bloomberg. In Poços de Caldas, Meteoric Resources, another Australian developer receiving US backing, says there are 1.5 billion tons of rare-earth clay in the surrounding hills.

Marcelo Carvalho says Meteoric’s objective is to put the project into production, become the next producer of mixed rare-earth carbonate, and develop separation technology. He also argues for doing it differently from China: “If you want to be sustainable, you have to buy from a sustainable market.”

The US is also backing domestic capacity. MP Materials in California’s Mojave Desert is presented as the Pentagon-backed company that is the US’s biggest hope. The Department of Defense bought a $400 million stake in MP Materials in 2025, and the company expects to be able to separate heavy rare earths later this year.

The common problem for challengers is China’s scale. China is large enough to squeeze margins before new competitors are secure. Joe Deaux says Western governments are intervening with money to build companies and backstop them against attempts by China to “flush” them out of the market.

A Bloomberg Intelligence estimate puts the funding at $10 billion in public money for rare-earth ventures outside China in 2026. That money is not just for mines. It is meant to help rebuild processing, magnet-making, technical competence, and enough industrial capacity to keep China from remaining the only practical route from ore to finished magnet.

The estimate marks a major turn, but the speakers are careful about what that money can achieve. Nectar Gan points to Japan’s experience: after 15 years, Japan’s dependence on China has fallen from about 90% in 2010 to roughly 60% to 70% now. The process is long and slow.

Martin Ritchie suggests that diversification, not full independence, is the more realistic target by 2030 and into the early 2030s: a company might aim for 60% from China and 40% from the rest of the world, or a 50/50 split. Deaux is more explicit about the timeline: the monopoly will not be broken within five years. Success, in his view, would be the US, Australia, Brazil, Japan, South Korea, and France all producing some commercial scale of rare-earth permanent magnets that are actually delivered to major buyers.