What are rare-earth minerals? The trade war’s new focus, explained

Update: The United States and China reached an interim trade deal after a high-stakes meeting. Here’s what it says

You’ve probably never heard of dysprosium or neodymium, but Tesla vehicles, F-35 fighter jets, and your iPhone rely heavily on them. These are two of 17 elements known as rare earth elements (REEs) – a bit of a misnomer because they’re actually not particularly rare. What is rare, however, is the ability to treat them. And that’s a big problem.

Today, China controls almost all global rare earth processing, while the United States scrambles to catch up. As demand for electric vehicles and high-tech defense increases, these somewhat obscure elements lie at the heart of the 21st century economy – and have increasingly become one of the main flashpoints in the escalating trade war between the United States and China.

Here’s what you need to know about rare earths and why the stakes are suddenly so high.

What are rare earth elements actually?

Despite the futuristic sound of the term “rare earths”, these are not exotic minerals sent from space. Rare earths are found in abundant quantities throughout the Earth’s crust, but they rarely appear in concentrations high enough to be easily mined and refined – and make it economical.

Instead, these elements are often mixed with radioactive rocks – think of a fruit salad made of minerals, the flavors of which are the REEs and the rest is literally waste.

Rare earth elements (REEs) fall into two main camps: light and heavy – terms given based on their atomic weight. Lightweight REEs, such as neodymium and praseodymium, are more common and primarily used in industrial applications such as permanent magnets for electric vehicle (EV) motors, wind turbines, and consumer electronics. Heavy rare earths, such as dysprosium and terbium, are much less common and much more difficult to process – and are more strictly regulated. They are essential for more specialized uses, including high-performance magnets, military equipment and advanced clean energy technologies.

A single F-35 fighter jet, for example, contains about 900 pounds of rare earth materials — a mind-boggling amount for elements most people have never heard of. Your iPhone? It may only contain a few grams, but without them it wouldn’t work.

China’s metal grip on the supply chain

China does not just exploit rare earths. it refines almost 100% of global production of heavy REEs and the majority of light REEs (around 90%). This means that even if the United States, Australia or other countries dig them up, they usually send them to China to separate them, refine them and produce magnets.

This choke point gives Beijing formidable economic (and strategic) leverage, which it is increasingly showing its willingness to use. In late 2023, China required companies to apply for export licenses to ship certain heavy REEs, catching global industries off guard. Officials described the move as a routine regulatory update, but industry experts and national security analysts saw it as a thinly veiled threat: China is ready to militarize its control of critical minerals. “China could use its dominant position in the rare earth market to gain leverage in trade negotiations,” the US Congressional Research Service noted in a 2023 report.

In 2025, things get worse. This spring, Beijing added seven key rare earth elements to its dual-use export control list, requiring special licenses for overseas shipments. Shortly after, it established an extensive permitting system for high-performance rare earth magnets. The consequences were immediate. Shipments stagnated for weeks, then months, especially for companies with heavy U.S. exposure. While European and Southeast Asian buyers received preferential treatment, American companies were largely excluded. Tesla reportedly saw delays in rare earth-related parts that hurt production.

Following high-stakes trade talks in London this month, China agreed to ease some restrictions – but only slightly. Magnet export licenses have been granted again, with one catch: They now expire after just six months. This is a classic geopolitical feint: relieve pressure long enough to restart negotiations, while keeping the threat close. Beijing has not issued a blanket ban. Instead, it is playing a longer game, using a strategy of continued export permits to maintain its influence while staying (technically) within the rules – showing how China can legally “weaponize” critical materials without an outright ban.

Why the auto industry feels rare earth restrictions first

Of all the industries caught in the crossfire, the automotive sector could be the most vulnerable. Automakers – particularly electric vehicle makers – are on the front lines of the rare earth crisis. Some would be in “total panic” because most electric vehicles use permanent magnet motors made from rare earths (like neodymium and dysprosium). These magnets are compact, powerful and essential for improving the range and energy efficiency of electric vehicles. Even traditional gasoline-powered cars use rare earths in components such as power steering systems, fuel economy sensors and braking mechanisms.

In short: no rare earths, no car.

Some automakers, including Tesla, have reportedly begun exploring motor designs without rare earths. But these alternatives often come with tradeoffs: larger size, lower performance, and reduced energy efficiency. Most companies aren’t ready to abandon ETRs anytime soon, especially as demand for electric vehicles continues to skyrocket.

Can the United States catch up?

It’s challenging, but the road is long and difficult.

The only active rare earth mine in the United States is Mountain Pass, California, which is owned by Nevada-based MP Materials. Despite producing a record 1,300 tons of neodymium-praseodymium oxide in 2024, the United States still does not have domestic facilities to process heavy rare earths on a commercial scale.

The Defense Department has committed more than $439 million under the Defense Production Act to jump-start a domestic supply chain, funding projects ranging from mining and refining to magnet production. The goal: to create a complete “mine to magnet” infrastructure in the United States. But analysts warn that even with significant federal support, domestic production won’t be able to meet demand until at least 2026 — and perhaps much later.

The Biden administration has prioritized rare earth independence as part of its broader clean energy and national security agenda. But the problem could worsen under the second Trump administration. President Donald Trump has would have launched the idea to expand the use of the Cold War-era Defense Production Act and hinted at creating a “rare earth reserve” modeled on the Strategic Petroleum Reserve to guard against future shortages.

MP Materials would be a big beneficiary. Bloomberg reported that Deputy Defense Secretary Steve Feinberg was working to find funding for the company, which has already received millions from the department. Defense Secretary Pete Hegseth said during a recent congressional hearing that MP Materials “is a great example of a place where we can collaborate with industry,” adding that Feinberg is focused on REE procurement.

China, for its part, seems to continue to strengthen controls. But as the United States and its allies step up efforts to diversify their supplies and build parallel supply chains, experts warn that the coming years could be marked by serious disruption, not only for electric vehicle makers, but also for defense contractors, clean technology companies and, more generally, advanced manufacturing.

Strategic minerals, strategic era

In the short term, the United States and Europe will likely rely more on stockpiles, subsidies, and partnerships with friendly mining countries like Australia and Vietnam. But many of these countries still send their ore to China for processing, at least for now.

In the long term, control of rare earths could determine who runs the global economy. Like oil in the 20th century and semiconductors in the 21st, rare earths are becoming a strategic asset, likely to shape industrial policy, trade negotiations and military power for decades to come.

They may not be household names yet. But in the shadow war for the future of energy and technology, rare earths are the most essential elements you may never have heard of.