Rare Earths Elements, Strategic Dependence, and the Limits of Decoupling
Rare Earths in Today’s Strategic Landscape
As debates over artificial intelligence (AI) increasingly focus on models, compute, and applications, the material base of the AI stack, where rare earth elements (REE) anchor technological capability and strategic power, has become a central feature of policy and security discussions especially in the last year. REE occupy this foundational position not because they are scarce in absolute terms, but because REEs are embedded deep within production systems where substitution is costly, alternatives are limited, and adjustment timelines are long. Therefore, REE’s strategic significance lies directly on their capacity to constrain technological choice and industrial scaling over time. In this sense, REEs function as enabling constraints: materials that do not merely support innovation, but condition in a large extend who can sustain it.
This dynamic is evident across three domains central to contemporary state power (Özdemir, 2025). First, in today’s technopolar world, where technological capacity increasingly defines international power, REEs are fundamental enablers. The ongoing strategic competition between the United States and China, especially in sectors like semiconductors, quantum computing, and AI, is underpinned by access to these critical materials. As technological supremacy becomes the new currency of power, REEs emerge as essential inputs in this rivalry. Second, in defense systems, they are integral to precision-guided munitions, sensing technologies, radar, drone, stealth aircraft and secure communications, where reliability and miniaturization are essential (Baskaran & Schwartz, 2025; Grasso, 2011; Lopez, 2024). Third, in the context of the energy transition, elements such as neodymium, praseodymium, dysprosium, and terbium form the backbone of electric vehicle motors, wind turbines, and grid technologies, binding climate objectives directly to material supply chains.
Considering this framework, what elevates rare earths from important inputs to strategic assets is the growing tension between their functional centrality and the concentration of their production and processing. This concentration implies imminent disruption such as during COVID-19, and at the same time it introduces persistent vulnerability for the states that do not have these minerals. As the result, the strategic autonomy and the political option of the states are limited in periods of geopolitical stress and leading to the limitation of the digital sovereignty. As a result, REEs have moved from the margins of trade policy to the center of strategic planning, reframing debates over technology not simply as questions of innovation, but as challenges of digital sovereignty in an increasingly contested international system.
As mentioned above, the importance of REE has intensified as strategic competition between the United States and China has shifted from tariffs and market access to control over critical technologies and their underlying supply chains. China’s dominant position, accounting for roughly 70 percent of global rare earth mining and more than 90 percent of processing and separation capacity, has enabled Beijing to signal its ability to use REEs as strategic leverage in response to U.S. export controls on advanced semiconductors and chip design technologies (Baskaran, 2025). In parallel, the Trump administration incorporated rare earths into U.S. strategy and diplomacy through a growing number of bilateral agreements, supply-chain partnerships, and domestic initiatives framing critical minerals as a core pillar of national security rather than a narrow industrial concern. One of the latest examples is the 2025 National Security Strategy where the Trump Administration focused extensively on the supply chain and REE recognizing them as essential to national security and economic resilience (The White House, 2025).
Within this framework, this commentary briefly examines China’s and the United States’ respective policies on rare earth elements and assesses the extent to which decoupling between the two remains feasible at present, particularly as digital sovereignty has emerged as a central strategic concern.
China’s Long-Term Approach to Strategic Minerals
China’s dominance in rare earth elements is best understood as the outcome of decades of deliberate strategic investment, rather than short-term opportunism. As early as the late 1980s and 1990s, Chinese policymakers identified RRE as foundational to advanced manufacturing and future technological competition, treating them as strategic assets embedded in national development planning. Deng Xiaoping’s oft-cited observation that “the Middle East has oil, China has rare earths” captured an early recognition that control over these materials could translate into long-term geopolitical and industrial advantage (Magnuson, 2021).
This strategic vision was operationalized through the construction of a vertically integrated rare earth ecosystem. China did not limit its focus to mining, but systematically expanded capacity across refining, separation, permanent magnet production, and downstream manufacturing. As a result, China now controls approximately 70 percent of global rare earth mining and more than 90 percent of processing and separation capacity, giving it decisive influence over the most critical choke points in the value chain. This integration has enabled China to capture value at every stage and to develop scale and expertise that few competitors have been able to match.
The strategic implications of this position became particularly visible in April 2025, when Beijing imposed export bans on several medium and heavy rare earth elements. These bans were introduced directly in response to U.S. restrictions on advanced semiconductor technologies and chip design, signaling China’s willingness to deploy rare earths as a retaliatory instrument of statecraft. In this sense, rare earths have begun to function as instruments of structural leverage, mirroring how oil reshaped geopolitics following the consolidation of supply power by OPEC in the 1970s.
China’s approach reflects a model of state capacity and strategic patience, in which control emerges through coordination, scale, and institutional continuity rather than coercion. Export restrictions and licensing mechanisms operate within a broader framework of production quotas, stockpiling, and state-backed industrial consolidation, reinforcing China’s ability to shape global market conditions. By contrast, many advanced economies long treated rare earths as interchangeable inputs within global supply chains, investing neither in processing capacity nor in downstream integration. The result is a structural asymmetry: China built rare earths into its industrial infrastructure, while others relied on access, an imbalance that now defines the strategic landscape of technological competition.
The U.S. Strategic Turn on Rare Earths
The strategic reorientation of U.S. policy toward rare earth elements accelerated during the Trump Administration, marking a decisive shift in how digital dependence and sovereignty was framed within national security discourse. REEs moved from being treated as technical inputs within global markets to politically salient assets tied to economic resilience, technological leadership, and strategic autonomy. This politicization was reflected not only in rhetoric, but in the use of diplomacy, trade policy, and industrial initiatives to address vulnerabilities in critical mineral supply chains.
A defining feature of this period was the integration of REEs into U.S. diplomatic engagement with allies and partners. The administration pursued a series of bilateral and plurilateral agreements aimed at securing access to critical minerals and diversifying supply sources. These included intensified engagement with Greenland over its largely untapped mineral potential; the Ukraine-United States Mineral Resources Agreement, which established a joint investment framework covering rare earths and other strategic minerals; and formalized cooperation with Australia through a framework targeting mining, processing, and refining of critical minerals. Parallel initiatives with Japan and Canada further embedded rare earths within a broader network of allied supply-chain coordination. This diplomatic push also extended to Central Asia, where the United States signed a memorandum of understanding with Kazakhstan in November 2025 to deepen cooperation on critical minerals, reflecting a broader effort to embed rare earths within U.S. strategic partnerships beyond traditional allies. Shortly thereafter the administration launched the U.S.-led Pax Silica initiative, a coalition of allied countries designed to secure a resilient silicon and semiconductor supply chain from critical minerals through advanced technology infrastructure. Collectively, these agreements elevated REE from a niche industrial concern to a core object of U.S. strategic diplomacy.
These developments laid the groundwork for a more systematic approach, which was consolidated in the 2025 National Security Strategy. NSS 2025 institutionalizes rare earths and other critical minerals within U.S. technology and security doctrine, embedding them in a broader framework that connects material access to AI development, defense innovation, and industrial policy. Rather than addressing rare earths through isolated initiatives or crisis-driven responses, the strategy frames supply chains as strategic terrain, integral to long-term national power and resilience (The White House, 2025).
The importance of NSS 2025 lies in its doctrinal consolidation rather than in any single policy shift. Earlier measures, often fragmented and reactive, are brought together into an integrated understanding of national security that aligns economic statecraft, technological planning, and defense priorities. In this framework, rare earths are no longer exceptional concerns but embedded components of a systemic approach to sustaining technological capability and strategic autonomy.
Implications and Open Questions
Debates over technological decoupling often assume a linear and accelerating trajectory. In practice, however, decoupling in the REE and advanced technology domains is likely to proceed gradually and selectively, shaped as much by structural constraints as by political intent. For the moment, decoupling appears less as an immediate rupture than as a background process, unfolding cautiously as both the U.S. and China remain acutely aware of their respective vulnerabilities.
From the U.S. perspective, dependence on rare earth mining, processing, and separation capacity continues to impose material limits on the speed and scope of separation. Despite intensified diplomatic engagement, domestic initiatives, and allied cooperation, building resilient rare earth supply chains remains a long-term endeavor. As a result, U.S. policy is likely to prioritize risk management and diversification rather than aggressive disengagement, deepening cooperation with allies while expanding domestic capacity incrementally. Decoupling, in this sense, is constrained by the physical and temporal realities of material production.
China faces a parallel constraint at a different layer of the technological stack. While it holds a dominant position in rare earth processing and downstream manufacturing, continued reliance on foreign advanced semiconductor design tools and high-end chip technologies limits its ability to fully insulate its technology ecosystem. This asymmetry helps explain Beijing’s sustained investment in domestic chip design, advanced manufacturing capabilities, and innovation capacity; efforts aimed at reducing exposure at the upper layers of the technology stack rather than accelerating separation prematurely.
Viewed together, these constraints suggest that both states have incentives to moderate the pace of decoupling until they are better positioned to absorb its costs. In the interim, competition is likely to take the form of parallel capacity-building strategies: the United States concentrating on securing and institutionalizing access to critical minerals, particularly rare earths, through domestic policy and allied cooperation; China focusing on strengthening its position in chip design and advanced technological development. Decoupling thus becomes a sequenced strategy, deferred until material and technological leverage is sufficiently consolidated.
In this framework, the decisive moment does not lie in the initiation of decoupling, but in its timing. Only once one side succeeds in substantially reducing its strategic dependence will the balance shift decisively in its favor, lowering the costs of more assertive separation. Until then, decoupling is likely to remain partial, calibrated, and subordinate to the shared recognition that technological power is still shaped by interdependence as much as rivalry.
References
Baskaran, G. (2025). China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains. https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains
Baskaran, G., & Schwartz, M. (2025). The Consequences of China’s New Rare Earths Export Restrictions. https://www.csis.org/analysis/consequences-chinas-new-rare-earths-export-restrictions
Grasso, V. B. (2011). Rare Earth Elements in National Defense: Background, Oversight Issues, and Options for Congress. Congressional Research Service.
Lopez, T. (2024, March 11). DOD Looks to Establish “Mine-to-Magnet” Supply Chain for Rare Earth Materials. U.S. Department of War. https://www.defense.gov/News/News-Stories/Article/Article/3700059/dod-looks-to-establish-mine-to-magnet-supply-chain-for-rare-earth-materials/
Magnuson, S. (2021, September 8). China Maintains Dominance in Rare Earth Production. https://www.nationaldefensemagazine.org/articles/2021/9/8/china-maintains-dominance-in-rare-earth-production
Özdemir, G. S. (2025). Jeolojiden Jeopolitiğe: Nadir Toprak Elementleri ve Türkiye’nin Konumu. Strateji Türkiye. https://stratejiturkiye.com/analiz/jeolojiden-jeopolitige-nadir-toprak-elementleri-ve-turkiyenin-konumu
The White House. (2025). National Security Strategy of the United States of America. https://www.whitehouse.gov/wp-content/uploads/2025/12/2025-National-Security-Strategy.pdf
