By Josh Richards and Joseph Hanacek

The Elemental Weapon

When China threatens to close its fist, the world listens. In August 2025, Li Chenggang, Beijing’s chief trade negotiator, didn’t bother with euphemism. If the United States continued tightening controls on advanced technologies, he warned, China would answer by restricting exports of the metals that make those technologies possible.1 Rare-earth elements, the invisible foundation of jet engines, electric vehicles, and precision weapons, had become bargaining chips in a new kind of power game.

It was a small statement with continental consequences. Within weeks, Chinese ministries began slowing export licenses for certain alloys and magnetic materials, sending nervous tremors through markets from Tokyo to Detroit. The message was unmistakable: what Washington thinks of as global supply chains, Beijing sees as instruments of leverage.

That moment captured the logic of the age. Over the last two decades, the United States and its allies treated the materials that underpin modern life, rare-earths such as lithium and cobalt as the anonymous plumbing of globalization. China treated them as strategy. Today it controls most of the world’s processing and virtually all of the stages that matter: refining, separation, and magnet manufacturing. In total, Beijing controls roughly 70 % of global mining, about 90 % of separation/processing, and more than 90 % of high-performance magnet manufacturing.2 The result is an asymmetry more dangerous than most weapons systems because it operates quietly, through dependency rather than force.

This is not simply a rehearsal for war over Taiwan and the global semiconductor market, though that flashpoint looms over everything. It is part of a broader campaign to reorder the global balance of power, to remind every nation that in the 21st century, the flow of materials can be as decisive as the movement of troops. Rare-earths have become Beijing’s favorite pressure point because they embody the new reality of competition: the next crisis may begin not in the Taiwan Strait, but in a factory that can no longer get the magnets it needs.

And yet, the story is not just about China’s dominance, it is about America’s choices. Whether the United States treats this as a passing market fluctuation or a defining national-security test will determine not only its industrial resilience, but its ability to deter coercion before a single shot is fired.

The Strategic Context: Material Leverage in a Post-Industrial Age

Beijing’s threats over rare-earth exports are not a sudden innovation; they are the predictable evolution of a decades-long strategy. China benefits from low-cost mining and lax environmental regulation, but their dominance in rare earth elements did not emerge purely from geological luck. Rather, China employed deliberate statecraft, leveraging industrial policy fused with geopolitical vision. Since the late 1990s, the Chinese government has poured billions into refining, separation, and magnet-making infrastructure, while the United States dismantled its own. By the 2010s, Beijing had learned to turn economic scale into political leverage: subsidize the middle of the supply chain, flood global markets, drive out competitors, and then consolidate control. What began as a commercial edge became a coercive instrument. 3

The results are stark. China now accounts for the overwhelming majority of global rare-earth processing and nearly all of the world’s high-performance magnet production—the beating heart of everything from precision weapons to renewable-energy systems. In a global economy where advanced technologies are the currency of power, control of materials is control of tempo. Beijing understands this intimately. Its 2023 export-control laws, followed by tightened magnet licensing in 2025, were not about profit; they were about signaling. 4 Each new bureaucratic delay or “security review” serves as a reminder that dependency is a policy choice, and that global markets operate at China’s discretion. 5

For the United States, this is not merely an economic vulnerability—it is a strategic liability. Every day that the refining, alloying, and magnet-making that feed America’s defense and technology sectors remain concentrated overseas, Washington’s deterrent posture weakens. The lesson is familiar to anyone who watched Russia’s manipulation of Europe’s gas supply in 2021: energy dependence and material dependence both collapse deterrence long before the first crisis erupts.

Why the U.S. Can’t Wait for Taiwan

It is tempting to treat China’s tightening grip on rare-earths as a prelude to war over Taiwan, a crisis to be managed “when the time comes.” That would be a mistake. The rare-earth squeeze is already here, unfolding in boardrooms and customs ports rather than battlefields. The August 2025 remarks from Li Chenggang were not idle bluster. They marked a deliberate escalation in Beijing’s campaign to use industrial interdependence as leverage, an offensive waged through permits, tariffs, and export licenses instead of missiles. 6

Beijing’s logic is simple and effective: coerce early, not late. By testing Western vulnerabilities before open conflict, China forces companies and governments into self-censorship and hesitation. It pressures investors to think twice about U.S. manufacturing projects and signals to allies that Washington cannot protect their supply chains. In other words, the weaponization of trade happens during peacetime precisely because it is more efficient than war.

Yet this economic coercion is not separate from Beijing’s territorial ambitions, but a prelude to them. The same strategic vision that seeks dominance in the Taiwan Strait also seeks dominance in the global flow of strategic materials. In both cases, the goal is the same: to make resistance costly and compliance inevitable.

If the United States waits for a military crisis to address these dependencies, it will have already lost the contest that matters most over industrial sovereignty. A credible response must begin now, while the tools of competition are still commercial and the battlefield still economic. The coming decade will test whether Washington can rewire its supply chains faster than Beijing can weaponize them.

The question of how to outmaneuver China is not abstract, but physical: how to rebuild the industrial arteries that power American strength. The contest over rare earths is a contest over the tangible ingredients of deterrence, the metals inside every jet, missile, motor, and microchip. What Beijing has achieved through decades of patient investment is not just control of markets but control of manufacturing tempo. To understand why this matters, and how deeply it runs through the U.S. economy, one must look beneath the headlines of trade disputes and into the machinery itself: where magnets, alloys, and sensors meet strategy.

Where the U.S. (and Allies) are Exposed

The United States’ advanced-technology economy is built on foundations most citizens never see and fewer understand. Every modern instrument of power, whether a fighter jet banking over the Pacific, a hypersonic missile guiding at Mach 5, an electric vehicle gliding through traffic, or a smart phone depends on the same microscopic ingredients: rare-earth elements. Neodymium, praseodymium, dysprosium, and terbium are not household names, but they are the metals that turn electrical energy into movement and precision. They make magnets that can survive the heat of jet engines, sensors that can detect the faintest electronic signals, and motors that spin with unmatched efficiency. When the ability to mine, refine, and magnetize those materials sits almost entirely overseas, dependency becomes a design flaw and a geopolitical risk. A shortage wouldn’t just slow production; it would stall entire defense and clean-energy programs at once.

The vulnerability lies not only at the start of the chain where ore is mined, but more critically in the middle, where those ores are refined, separated, and transformed into alloys and magnets. This “midstream” is where complexity, not geology, determines control. The United States can mine all the raw material it wants, but if it must still send concentrates overseas for separation or metallization, it remains at the mercy of those who own the processing plants. The Mountain Pass Mine in California illustrates the dilemma perfectly. It sits atop one of the world’s richest rare-earth deposits and can produce thousands of tons of concentrate each year, yet for much of its modern history those concentrates were shipped abroad to China for processing. Even as domestic separation resumes, the legacy of dependence lingers: until the U.S. can transform raw ore into finished magnets within its own industrial base, its security rests on someone else’s permits.

Analysts warn that even as mining diversifies, with new projects in Australia, Canada, and parts of Africa coming online, the choke point has simply shifted downstream. The “systemic trade risk,” as researchers call it, now clusters around the intermediate tiers: the solvent-extraction circuits that separate individual elements and the precision magnet plants that turn them into usable parts. China holds dominance over both.7 These are capital-intensive, chemically complex, and environmentally sensitive operations that Beijing spent decades perfecting and subsidizing while Western economies outsourced them. The United States today may have more mines in motion than ever before, but its midstream, the critical infrastructure for processing and magnet-making that turns geology into power remains fragile. Without it, every ton of ore dug in Nevada or Texas is still just another shipment waiting on a license from somewhere else.

A Strategic Blueprint: Five Interlocking Tracks

If the rare‐earth supply-chain shock is a plausible act of coercion, the U.S. must respond with a layered strategy. Here are five tracks—each reinforcing the others, each aimed not merely at mining more, but at transforming structural dependence into structural resilience.

A Strategic Reserve That Buys Time, Not Trophies. The United States doesn’t need a warehouse of geological curiosities—it needs a reserve that buys time in a crisis. That means stockpiling what defense and energy programs actually consume: refined oxides, metals, and magnets, rotated through active contracts to keep quality current. The reserve should function like an insurance policy, bridging weeks or months of disruption while diplomacy and supply adjust. Time, not tonnage, is its true measure. 8

An Allied Sourcing Compact. The path to resilience runs through partners. Australia’s separation plants, Canada’s deposits, Japan’s precision engineering, and Vietnam’s emerging reserves all form a foundation for shared security—if bound together by long-term offtake agreements and reciprocal release protocols. The Minerals Security Partnership already convenes these players; what’s missing is teeth. A formal compact—backed by price floors and clear crisis procedures—would convert goodwill into capacity. 9

Finishing the Middle at Home. America’s rare-earth story cannot end at the mine gate. True independence depends on the midstream—refining, separation, and magnet fabrication. Federal incentives through the Defense Production Act and DOE’s loan programs must target this stage, where every new processing line multiplies the effect of every new mine. Shared “tolling” facilities could let smaller miners buy processing services rather than build redundant plants, creating an ecosystem rather than a patchwork of projects. 10

Permitting That Moves at Strategic Speed.
Time is the ultimate enemy. A mine that takes ten years to permit is a strategic liability. The solution isn’t cutting corners—it’s aligning process with purpose: single-agency coordination, concurrent reviews, and designated industrial corridors with infrastructure in place. Projects that meet the highest environmental and community standards should move fast because they meet them, not despite them.

Recycling and Substitution That Close the Loop. America’s next rare-earth supply may come not from mountains but from scrapyards. Every retired wind turbine, EV motor, and hard-drive array contains magnets rich in recoverable material. A national recycling framework—paired with research into lower-dysprosium magnet designs—can reclaim what would otherwise be waste. Substitution doesn’t eliminate dependence overnight, but it bends the curve, turning scarcity into opportunity. 11

Rare-earth projects die in the troughs. Contracts-for-difference, floor-price puts, and anchored offtakes are not industrial charity; they are anti-whiplash technologies that make private capital rational. Pair those tools with Export-Import Bank and DFC support for allied projects in exchange for delivery rights, and suddenly the spreadsheet’s “downside case” looks financeable. The effect is cumulative: every financed separator or magnet line reduces the premium Washington pays for emergency barrels of oxides later.

A Phased Timeline

The first phase should begin immediately, focusing on shock absorbers rather than monuments. Within a year, the U.S. could establish a functioning Strategic Rare Earths & Magnets Reserve, buying and rotating modest quantities to work out logistics, and negotiate ten-year offtake and stock-swap agreements with close allies like Australia and Canada. These are achievable within existing authorities and budgets. At the same time, Washington should channel current Defense Production Act and Department of Energy funding toward the midstream: separation, metallization, and magnet lines that are already half-built. The goal is not to design new programs but to finish those that exist, turning ribbon-cuttings into production runs. Finally, a Five Eyes–EU monitoring cell should start quarterly stress-tests, with dry runs for a 90-day licensing freeze so that when friction appears in a port or a ministry, policymakers see it before procurement officers feel it.

The second phase, spanning roughly two to three years, must consolidate what the first began. Domestic refining and magnet lines should transition from pilot to full-scale operation, the reserve should grow into a buffer measured in months of defense and grid demand, and allied offtakes should begin steady delivery. This is also when recycling must move from experiment to infrastructure, with federal procurement preferences creating a guaranteed home for recycled content. On the regulatory side, the first industrial parks and brownfield re-mining projects should clear the new permitting regime, signaling credibility to investors that timelines are finally predictable.

By years three through seven, America’s resilience becomes clearly visible. Allied supply chains mature; U.S. magnet production satisfies a majority of domestic needs; and the strategic reserve gives Washington options when China flexes its licensing power. At that point, the geopolitical logic changes: when Beijing threatens to tighten a licensing screw, markets still move, but U.S. production schedules remain steady.

Strategic Implications for the Indo-Pacific and Taiwan

Although this paper does not hinge on a Taiwan invasion, that scenario illuminates the stakes. Taiwan remains central to the U.S.–China competitive equation. If Beijing were to blockade or invade Taiwan, U.S. and allied capabilities will depend on magnets, sensors, propulsion systems, many of which rest on rare-earth chains. If now the U.S. enters crisis mode and cannot spin up magnet production or import alternatives, the tactical decisions in the Strait will be made under supply shock, not strategic coherence and once the US military’s supply of expensive high-end munitions is exhausted, replacement will be difficult if not impossible

Moreover, an early rare-earth crisis, whether linked to Taiwan or technology competition (AI, cyber, semiconductors), can blunt U.S. response before kinetic conflict begins. Therefore, the rare-earth strategy is less a “nice to have” and more a mission-critical enabler of defense and economic posture in the Indo-Pacific.

Cost, Risk, and the Iron Law of Trade Leverage

The scale of investment, though nontrivial, is modest compared to the cost of being caught unprepared. Billions of dollars over five years for a reserve, tens of billions over a decade for full mid-stream build-out. The risks: project cost overruns, permitting delay, price collapses, partner country policy shifts. Many commentators have noted the U.S. faces a “rare-earth delusion” if it assumes mines alone solve the problem.12

But the alternative risk is far greater: if China decides to throttle supply, the industrial base, defense production, and allied manufacturing face cascading effects. The cost of doing nothing, or doing too little, is catastrophic strategic leverage left in the hands of an adversary.

Making the Blueprint Real

Blueprints don’t move metal; politics does. The architecture for rare-earth resilience already exists; the challenge now is execution. Turning strategy into supply will require coordination across institutions that rarely move in sync: Congress, the White House, the private sector, allied governments, and the capital markets that finance them all. Each has a role that only it can play.

Congress must provide consistency where markets cannot. It can modernize the Defense Production Act to treat separation, metallization, and magnet-making as enduring national-security priorities, not emergency programs that expire with each appropriation cycle. Long-term procurement authority, multi-year funding, and statutory stockpile mandates would tell industry that the rare-earth effort will outlast the next budget fight.

The executive branch holds the levers of speed. The White House and its interagency partners can cut permitting timelines, streamline environmental reviews, and integrate the work of DOE, DOD, and Commerce under a single critical-materials coordinator. The Minerals Security Partnership should evolve from a diplomatic forum into an operational alliance, tasked with financing and synchronizing projects across allied supply chains.

Industry and finance are the builders. Public capital can launch projects, but private capital must scale them. To draw investment into a volatile sector, Washington should expand price-stabilization mechanisms, such as floor-price guarantees, offtake contracts, and export credit support, so investors can model predictable risk. Without those tools, every project remains a gamble on Beijing’s next export decree.

Allies can be force multipliers when relationships are properly balanced and maintained. Australia, Canada, Japan, Vietnam, and the EU already have the geology and the expertise; what they need is U.S. demand certainty and shared strategic planning. Reciprocal stockpile release agreements, joint procurement, and common standards for refining and magnets could convert fragmented national efforts into a collective shield against coercion.

Finally, the public sector, from state governments to research institutions, must fill the innovation gap. Recycling systems, magnet reclamation, and material substitution will determine whether this decade’s investments build independence or simply delay dependence. Federal and state coordination on industrial parks, tax credits, and workforce training can ensure that new facilities are not just built but sustained.

If there is a single lesson from recent history, it is that resilience is rarely won in crisis, it is built in advance, when the costs are political rather than existential. China’s command of rare-earths supply is not destiny; it is the product of time, will, and coordination. The United States can still match it, but only if it acts with the same discipline and purpose.

The next confrontation may not unfold in the Taiwan Strait but in a shipment log, a licensing bureau, or a factory floor. The question is whether Washington will treat the rare-earth race as a line item, or as the front line.

Conclusion

In the decade ahead, warfighting and deterrence will not only be determined by fleets, missiles, and satellites; they will be shaped by mills, magnets, alloys and processing lines. Here is the dilemma: the United States has for too long treated rare-earth elements as an economic commodity subject to market forces. China treats them as strategic infrastructure subject to Party control.

The good news: the U.S. still has time. The moment of kinetic conflict in the Taiwan Strait, or a wider Indo-Pacific war is not today. But the moment of supply shock may well come before. When it does, the margin between success and failure will likely be defined by how quickly the U.S., its industry and its allies can spin those magnets, feed those sensors, roll those motors. The bets made today on stockpiles, allied contracts, processing plants, recycling and permitting reform are not optional; they are structural.

Deterrence is not just about sending ships and jets. It is about ensuring the industrial base behind those systems is resilient, trusted and redundant. When the next adversary contemplates turning off the tap on rare-earths, the United States should be the one saying: go ahead, the supplies are already on deck, production lines are humming, and we have a plan B at the ready.

That is how you turn elemental leverage into resilience, and how you ensure that supply chains become part of our defense, not part of their coercion.

Josh Richards is the Chief Commercial Officer of Pacific Peering. He serves on the UN’s Joint Task Force on SMART Cables as a member of the Steering Committee, and chairs the Business Development Committee. He is a Security Fellow with the Truman National Security Project, a Tech Policy Fellow with the Aspen Institute, and a Senior Fellow with AI2030.

Joseph Hanacek is a Surface Warfare Officer in the United States Navy. He serves as a Warfare Tactics Instructor at the Surface Advanced Warfighting School detachment of the Naval Surface and Mine Warfighting Development Center in San Diego, CA. The views and opinions presented herein are those of the author and do not necessarily represent the views of the Department of War, the Department of the Navy, or its components.

References

1. Hidayat, Muflih. “China’s New Rare Earth Export Controls: Global Supply Chain Impact.” Discovery Alert, October 16, 2025 https://discoveryalert.com.au/news/china-rare-earth-export-controls-2025-impact/

2. Baskaran, Gracelin. “China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains.” Center for Strategic and International Studies, October 9, 2025 https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains

3. Klimek, Peter, Sophia Baum, Markus Gerschberger, and Maximilian Hess. “Systemic Trade Risk Suppresses Comparative Advantage in Rare Earth Dependent Industries.” arXiv, August 1, 2025 https://arxiv.org/abs/2508.00556

4. Baskaran, Gracelin. “China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains.” Center for Strategic and International Studies, October 9, 2025 https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains

5. Reuters. “China Expands Rare Earths Restrictions, Targets Defense and Chips Users.” Reuters, October 9, 2025 https://www.reuters.com/world/china/china-tightens-rare-earth-export-controls-2025-10-09/

6. Hidayat, Muflih. “China’s New Rare Earth Export Controls: Global Supply Chain Impact.” Discovery Alert, October 16, 2025 https://discoveryalert.com.au/news/china-rare-earth-export-controls-2025-impact/

7. Klimek, Peter, Sophia Baum, Markus Gerschberger, and Maximilian Hess. “Systemic Trade Risk Suppresses Comparative Advantage in Rare Earth Dependent Industries.” arXiv, August 1, 2025  https://arxiv.org/abs/2508.00556

8. Baskaran, Gracelin. “China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains.” Center for Strategic and International Studies, October 9, 2025 https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains

9. Kozul-Wright, Alex. “Can Australia Provide US with Rare-Earth Metals Which China Has Restricted?” Al Jazeera, October 17, 2025 https://www.aljazeera.com/news/2025/10/17/can-australia-provide-us-with-rare-earth-metals-which-china-has-restricted

10. Baskaran, Gracelin. “China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains.” Center for Strategic and International Studies, October 9, 2025 https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains

11. Cameron, Hugh. “China’s Rare Earth Restrictions Could Backfire on Xi. Here’s How.” Newsweek, October 16, 2025 https://www.newsweek.com/chinas-rare-earth-restrictions-could-backfire-on-xi-heres-how-10886552

12. Foroohar, Rana. “America’s Rare Earth Delusion.” Financial Times, October 19, 2025 https://www.ft.com/content/583abbd2-ffa8-4232-931f-66f55949b5d5?syn-25a6b1a6=1

Featured image: An open-pit mine in Kokpatas, Uzbekistan, operated by Navoi Mining and Metallurgical. (Photo by U.S. Army Acquisition Support Center)