The ongoing trade war between China and the United States has taken a significant turn as China implements one of its preferred tactics for retaliation: imposing restrictions on the export of critical minerals. These minerals are essential for a wide array of high-tech electronics, ranging from advanced military fighter jets to renewable energy solutions like wind turbines. While the announcement of these mineral restrictions may seem alarming at first glance, historical context suggests that their efficacy may be limited, especially if the United States and other nations mobilize their resources effectively.

This latest chapter in the trade conflict began in July 2023, when the Chinese government declared plans to restrict the export of gallium and germanium, two pivotal minerals heavily utilized in the production of solar panels and semiconductors. Over the ensuing two years, these restrictions have broadened, encompassing further critical materials such as antimony and graphite. In an escalation of this trend, the Chinese government recently subjected seven rare earth elements to a stringent export licensing regime that is globally applicable, effectively targeting American companies and their supply chains.

Rare earth elements, which fall under a broader category known as critical minerals, have long been under China's control, allowing the country to exert a monopoly-like grip over this vital sector. While immediate stockpiles or the recycling of electronic components may provide a short-term workaround for companies reliant on these materials, the long-term outlook necessitates that the United States and other countries either enhance domestic mining operations or find alternatives to reduce their dependency on Chinas rare earths. According to Ian Lange, an associate professor of economics and business at the Colorado School of Mines, China has got one shot, and it knows it.

The recent export controls specifically target seven elements categorized as rare earths: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. Despite their designation as "rare," these elements are not inherently scarce; rather, their rarity stems from the complexities involved in extracting and isolating them from other mineral resources. Out of the 17 known rare earth elements, the Chinese government strategically selected these seven based on their substantial control over them in global markets, primarily because they belong to a subset known as heavy rare earth minerals.

Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies, notes that this monopoly has been cultivated over decades as China built a comprehensive supply chain for these minerals while the rest of the world steered clear of this environmentally detrimental and specialized industry. China processes pretty much 100 percent of the worlds heavy rare earths, which means that they dont just have a comparative advantage; they have an absolute advantage, emphasizes Baskaran.

It is important to recognize, however, that while rare earths serve numerous applications, many products contain only minimal amounts of these elements, often playing supportive roles in their functionality. For instance, in 2022, the United States imported around $170 million worth of rare earth elements, including some not affected by China's export limitations, according to data from the United States Geological Survey. For perspective, this figure is dwarfed when compared to the $327 million worth of fresh potatoes and $300 million worth of potato chips imported during the same period from September 2023 to August 2024.

Among the most critical applications for rare earth elements is their role in manufacturing high-performance magnets that significantly enhance the efficiency of electric motors, particularly in demanding high-temperature environments. These specialized magnets are integral to various consumer products, including electric vehicles and household appliances like vacuum cleaners, illustrating the importance of rare earths in modern technology.