In response to the tariff war initiated by U.S. President Donald Trump, China quickly implemented countermeasures by imposing a 34% tariff on U.S.-origin imports and announcing strict export controls on seven critical rare earth elements — samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. This move is seen by industry experts as a “precision strike” on U.S. defense supply chains, potentially further disrupting the global landscape for high-tech and military equipment manufacturing.
Mark A. Smith, CEO of U.S. rare earth miner NioCorp Developments (NASDAQ:NB), stated that China’s actions deliberately targeted the Pentagon’s core supply chain. In his statement, he emphasized, These are not just metals; they are bottleneck elements. Without them, the U.S. military’s most advanced weapons systems risk slipping from technological superiority to obsolescence. These restricted rare earth elements are widely used in military systems such as fighter jets, missiles, and satellites, as well as in civilian products like electric vehicles and smartphones.
The U.S. currently operates only one active rare earth mine, with the majority of its rare earth supply reliant on imports. In comparison, China accounts for 90% of global rare earth production, maintaining an overwhelming advantage. Prior to this, China had already imposed similar export restrictions on strategic materials like gallium, germanium, and graphite. Faced with this situation, the U.S. Department of Defense is accelerating efforts to boost domestic rare earth production, and the Trump administration has previously invoked wartime powers under the Defense Production Act to address dependency on critical minerals.
In April 2024, the U.S. Department of Energy allocated $17.5 million to support four projects aimed at processing rare earths and critical minerals, using coal and its byproducts as raw materials. David Merriman, Research Director at market research firm Project Blue, pointed out that the U.S. is fostering domestic supply chains by funding primary and secondary rare earth mining, as well as recycling rare earth-containing products. Simultaneously, funds are being allocated for the ongoing construction of rare earth processing plants and the production facilities for neodymium-iron-boron (NdFeB) magnets.
Ucore Rare Metals (TSXV: UCU, OTCQX: UURAF), a company focused on developing rare earth refining technologies, announced that its proprietary RapidSX rare earth processing technology has received nearly $8.3 million in funding and contracts from the U.S. and Canadian governments. The company’s CEO, Pat Ryan, stated that China’s rare earth export controls highlight the urgency of establishing a self-reliant supply chain in North America. Ucore is currently constructing a rare earth processing plant in Louisiana aimed at reducing dependence on foreign supplies.
Although the export controls do not completely prohibit the export of these rare earth elements, they intensify scrutiny of materials that serve both military and civilian applications. As U.S.-China trade tensions escalate, the battle for strategic resources is becoming increasingly heated.
