The Rare Earths War: USA vs. China
The tensions between the USA and China regarding rare earths have significantly escalated in recent months. These conflicts could have far-reaching effects on the global commodity market and technology companies, as rare earths are essential for many modern technologies.
Background and Causes
- US Dependency on China: The USA is heavily dependent on China for the import of rare earths. China controls about 61% of the global production of these strategically important raw materials, which are used in smartphones, electric motors, generators, and military equipment.
- Trade Conflict and Tariffs: The trade conflict between the USA and China has intensified, with mutual punitive tariffs and export restrictions. In April 2025, China restricted the export of seven strategically important heavy rare earths and imposed additional tariffs on US goods.
Impact on the Global Market
- Availability and Price Development: China’s export restrictions lead to delays in the supply chain and can drive up prices for rare earths. This affects the production of magnets, motors, and other technologies that rely on these raw materials.
- Technology Companies: Companies like Tesla are affected by the export restrictions. Elon Musk mentioned that China wants to ensure that the components are not used for weapon systems, which delays the development of products like the Tesla Optimus robot.
Strategic Reactions
- US Strategies to Reduce Dependency: The USA is attempting to reduce its dependence on China by promoting domestic production of rare earths. Some companies plan to build new production facilities to expand capacities and look for alternative suppliers.
- China’s Geopolitical Position: China is utilizing its dominance in the rare earth sector as a geopolitical bargaining chip. The export restrictions are part of a comprehensive strategy to advance its interests in the trade war with the USA.
Conclusion
The conflict over rare earths between the USA and China has significant implications for the global commodity market and the technology industry. While the USA attempts to reduce its dependency, China is leveraging its market dominance as a strategic tool in the trade war. The tensions could lead to further price increases and supply shortages, potentially impacting the global economy and technological development.