US versus China: the battle for rare earth dominance

During Scott Bessent’s confirmation hearing for US Treasury Secretary before the Senate Finance Committee, significant concerns were raised regarding China’s dominance in the rare earth elements (REEs) market.

The Committee underscored that China controls approximately 70 percent of global rare earth mining and nearly 90 percent of refining capacity, a near-monopoly that grants Beijing substantial influence over these critical materials. This dominance poses severe risks to US national security, economic stability, and technological independence, given that REEs are essential for industrial, technological, and military applications.

The hearing emphasized that rare earth elements are crucial for advanced defence systems, including missile guidance, jet engines, satellite communications, and space technology. Any disruption in supply from China could cripple US military readiness and weaken its technological superiority.

Beyond defence, rare earth metals and other industrial minerals such as cobalt, lithium, and nickel are essential for semiconductors, batteries, electric vehicles (EVs), and clean energy infrastructure.

Senators cautioned that China’s control over these resources grants it significant leverage over the global transition to clean energy, potentially undermining US and allied economies.

Committee members cited past instances, such as China’s restriction of rare earth exports to Japan in 2010 during a diplomatic dispute as evidence that Beijing is willing to weaponise its resource monopoly for geopolitical and economic advantage.

The Committee expressed concerns that China could employ similar tactics against the US, exacerbating supply chain vulnerabilities. Senator Catherine Cortez Masto further highlighted that China’s rare earth dominance enables it to dictate high-tech manufacturing sectors, particularly in semiconductors, aerospace, and renewable energy.

Given these strategic risks, the Committee called for urgent action to diversify supply chains, boost domestic mining and refining capabilities, and reduce reliance on Chinese-controlled minerals to safeguard US economic and national security interests.

To reduce US dependence on Chinese rare earth metals and industrial minerals, the Senate Finance Committee deliberated on a series of counter-measures aimed at reshaping global supply chains, increasing domestic production, and forming strategic alliances.

Scott Bessent and Senator John Cornyn underscored the urgency of restoring and expanding rare earth mining within the US, proposing federal tax incentives, regulatory streamlining, and public-private partnerships to encourage domestic extraction and processing of rare earth elements.

While the US possesses rare earth deposits, the lack of domestic refining capacity forces American companies to rely on China for processing these materials.

Addressing this critical gap, Senator James Lankford advocated for developing refining infrastructure within North America to establish a self-sufficient rare earth supply chain. In parallel, the committee discussed bolstering rare earth supply agreements with allies such as Canada, Australia, and Japan—nations with significant untapped reserves.

A proposed US-led mineral alliance would ensure reliable sourcing of critical materials while mitigating dependence on China.

Beyond traditional mining, Senator Todd Young emphasized the necessity of investing in next-generation mineral extraction technologies, including deep-sea mining and rare earth recycling, as alternative strategies to counter China’s dominance.

The committee also explored global initiatives to identify and control rare earth mining sites, reinforcing efforts to establish US-aligned mining and refining capabilities as a long-term strategy to secure industrial and technological independence while countering China’s increasing global influence over rare earth resources.

Additionally, Bessent and several Senators discussed imposing punitive tariffs, sanctions, and legislative restrictions on Chinese rare earth materials. They proposed financial constraints on Chinese mining firms operating in Africa, Latin America, and Asia, alongside legislative measures to prevent Chinese state-backed entities from acquiring US mining assets.

The committee cited previous instances where China acquired American rare earth mines only to shut them down, further tightening its global grip on supply.

The hearing reinforced a strong bipartisan consensus on the urgent need to reduce US dependence on Chinese-controlled minerals.

The proposed strategies encompassed investing in domestic mining and refining infrastructure, developing alternative supply chains with allied nations, expanding research into mineral recycling and advanced extraction technologies, enforcing trade restrictions and tariffs on Chinese rare earth materials, and blocking Chinese acquisitions of US mining assets. These comprehensive measures aim to secure US economic and national security interests while counteracting China’s strategic control over the rare earth market.

The committee correctly identified weaknesses in US strategies, including sluggish decision-making, bureaucratic red tape, and a long-standing failure to recognize the strategic importance of rare earth metals. In contrast, China demonstrated vision and foresight by identifying the significance of rare earth metals at the right time.

While the rest of the world largely overlooked their potential, China invested heavily in this critical sector, forging mutually beneficial partnerships with host countries and systematically developing a mining, transportation, and refining ecosystem.

Through strategic leadership, sound policies, and effective execution, China gained near-complete control over the mining, refining, utilization, and marketing of these essential elements—securing its dominance in the global supply chain.

Although the US has now realized the urgency of the situation and is working on strategies to regain control over the mining, refining, and marketing of these critical minerals, it faces a significant lag. Establishing a robust ecosystem that can deliver tangible results will likely take another decade.

The current scenario underscores the need for a systemic review of how the US monitors and anticipates game-changing catalysts. Instead of reacting when competitors have already monopolized key elements of power, the US must develop mechanisms to foresee their long-term strategic value and act proactively.

Unfortunately, the US is currently in a reactionary mode—attempting to counter China’s dominance through sanctions, legislative restrictions, and trade barriers while simultaneously working to build its own rare earth infrastructure to recover lost ground.

However, such a delayed response puts the US at a significant disadvantage. Moving forward, the US must rethink its decision-making processes, ensuring that it identifies and invests in critical resources at the right time rather than playing catch-up after others have already secured their strategic advantage.

Copyright Business Recorder, 2025