When China imposed export controls on several rare–earth elements (REE) as part of its ongoing trade war with the US, many touted it as another geopolitical masterstroke since it mines roughly 70% of the world’s rare earths and refines nearly 90% of them. Since everything from cars and computers to factory robots and defence equipment relies on these rare–earth elements, the perception was that restrictions would cripple many countries. While this argument makes superficial sense, it doesn’t hold much weight. If anything, Chinese export controls will ultimately accelerate the end of its rare–earth dominance without heavy losses to other countries. Here’s why.

Anatomy of China’s dominance


Throughout the 1990s and early 2000s, western firms shuttered solvent‑extraction plants for environmental reasons. Chinese provincial govts stepped in, backed by subsidised power and land. But this was not a triumph of unique chemistry. Solvent extraction was developed in the West in the 1950s and though China, after three decades of near‑total clustering inside the country, has indeed made refinements to the process, the underlying science remains well within reach of western labs.

China has protected its monopoly with economics rather than technology. Whenever a non‑Chinese refinery or processing plant threatened to scale up, Chinese exporters, subsidised by the govt, flooded the market with below‑cost REEs, driving new entrants into insolvency. Alternatively, Chinese firms bought out the international companies. However, a monopoly created by dumping can survive only as long as the monopolist keeps dumping. By restricting exports, as it has done now, Beijing loses the weapon that kept rivals at bay.Embargo weaker than it seems

Two further facts dispute the narrative of invincibility. First, the volumes involved are surprisingly small. The US imported a mere $170 million worth of REEs in 2024, a decrease from $186 million in 2023. Even if these costs increase by five or ten times, they will have a minute impact on the US economy. Second, the rest of the world is not starting from the ground up. Australia and Canada have expedited lithium, graphite and rare‑earth projects, and the US mineral security partnership has established a financial network between partner countries to streamline project finance. Washington has also gone on a mine-licensing spree in response to China.Three ways to cut China dependence

Substitute: The first is simply material substitution. In battery chemistry, lithium‑iron‑phosphate (LFP) cathodes, which require no cobalt or nickel, now power a large share of entry‑level electric vehicles. On the motor side, Toyota and several European suppliers have demonstrated permanent magnets that replace half the heavy rare‑earth loading with lanthanum and cerium without losing torque. When substitution at the material scale is insufficient, entire architectures are being swapped over the medium term. For example, Tesla has declared its next‑generation platform will eliminate rare earths wholly. Both these approaches reduce reliance on Chinese‑sourced material.

Recycle: Increasing recyclability will further curb demand in the coming years. Japan’s Hitachi recovers 97% of magnets from end‑of‑life hard‑disk drives and AC compressors on semi‑automated lines. Mining company Lynas, working with Blue Line in Texas, will commission the world’s first heavy‑rare‑earth separation circuit outside China next year.

Improve efficiency: Not only are smartphone firms like Apple expanding their use of recycled REEs, they’re also using less. Smartphones and wearables now sip micrograms where they once swallowed milligrams.A self‑defeating embargo

By restricting shipments, Beijing is lifting prices worldwide and incentivising countries to set up processing elsewhere. Once the capital is sunk into new refining in the rest of the world, even a later U‑turn by China cannot quickly claw these customers back. The tactic also undermines China’s typical market‑flooding response. It can no longer depress prices globally without first loosening those very export controls. The result is a strategic dilemma — either keep curbs and accelerate diversification or scrap them and watch prices collapse.

Instead of ruing over China’s REE power, this is an opportunity. India’s National Critical Mineral Mission (NCMM) comes at the right time. Private sector can now apply for licenses to explore and mine critical minerals. Policies encouraging exploration, fast-tracking critical mine projects, a framework for rare–earth recycling, and creating joint stockpiles with friendly countries would make India a part of this critical supply chain.
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Views expressed above are the author's own.

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