Amid the swirl of headlines about a US-China trade breakthrough in London on June 11, it is reported that US President Donald Trump said the US and China had made a “great deal” — with China agreeing to supply US companies with magnets and rare earth metals, while the US would walk back its threats to revoke visas of Chinese students.
The exclusion from tariffs wasn’t an accident. The truth is, rare earths remain the subterranean faultline of the US-China trade and tech rivalry. Both sides have acknowledged a strategic impasse that neither rhetoric nor short-term compromise can resolve. For the rest of the world, including regional hubs like Singapore, this is not just a footnote — it is a seismic undercurrent.
Rare earths are an odd class of materials: not actually rare, but costly and environmentally damaging to refine. According to the International Energy Agency, China controlled over 60% of rare earth mining and more than 90% of global refining capacity as of 2023.
Rare earths are also extracted elsewhere — most recently with Shan State in Myanmar as a new rare earth site, where Chinese investors opened processing plants. This makes China the indispensable middleman in a supply chain that supports green energy, defence technologies and semiconductors. For Washington, this represents a choke point; for Beijing, a pressure valve.
The United States, despite recent efforts to reshore capacity, remains structurally dependent on outside supply processing. The Mountain Pass mine in California — America’s only operational rare earth mine — exports 80% of its output to China for processing. The RAND Corporation recently warned that even a 90-day disruption in rare earth supply could force nearly 78% of US defence contractors to halt production. A single F-35 fighter jet contains over 400 kilogrammes of rare earth materials, and the figures climb even higher for advanced naval systems.
So why were rare earths left off the table? Because their leverage is mutual. The US cannot easily decouple without massive cost, while China cannot weaponise them without reputational damage and economic blowback. Each side is caught in a paradox: reliant and resistant, vulnerable yet emboldened.
This equilibrium of strategic discomfort explains the silence. The rare earths question lingers, unsolved and unspoken, precisely because addressing it might fracture the illusion of progress that both sides desperately want to sell at home.
In fact, the urgency of this unresolved dilemma has only grown in recent weeks. On June 13, China’s Ministry of Commerce quietly updated its export controls on gallium and germanium derivatives — two rare earth-related materials critical to semiconductor and solar technologies. While not a full-blown restriction, the move introduced new licensing protocols, causing immediate concern in global markets.
This was not a blunt show of force. Rather, it reflected Beijing’s strategic doctrine of precision targeting. China’s stated justification — that these materials are dual-use and fall under non-proliferation obligations — aligns with historical precedents such as the Wassenaar Arrangement — a multilateral export control regime governing the international transfer of conventional arms and dual-use goods and technologies.
As a result, on June 24, the Shanghai Rare Earth Index is reported to in response, while German automakers and US defence contractors issued joint statements warning of “disruptive uncertainty” in component sourcing. These calibrated signals from Beijing reaffirm its willingness to use rare earths as a sophisticated lever — tightening just enough to remind Washington and Brussels where the fulcrum lies.
China, for its part, appears content to leave the rare earths ambiguity intact. It serves both as a veiled threat and a strategic reserve. Meanwhile, the US is scrambling to build alternative supply chains, from Australia to Canada, but these are years from full capacity. Japan, which faced a Chinese rare earth embargo in 2010, learnt this lesson early and now treats the issue as one of national security.
This shift is not without constraints. China has little interest in provoking collateral damage to key third-party markets such as the European Union, Japan, South Korea or members of Asean — partners whose continued engagement is essential in the broader context of China’s rivalry with the United States. That is why Beijing’s rare earth policies — while forceful — have remained selective, signalling deterrence without indiscriminate disruption.
The United States, for its part, faces a more constrained hand. Past efforts to diversify supply chains have been slow to scale. Refining remains a particular bottleneck. The US Department of Defense estimates it will take at least a decade and $10 billion to build a full mine-to-magnet supply chain capable of meeting national security needs.
Meanwhile, some US firms are reportedly considering relocating parts of their supply chains to China to sidestep export controls — an ironic twist in a policy intended to bring manufacturing home. Recycling initiatives like the Department of Energy’s ReElement programme show promise but remain years away from large-scale impact.
It suggests that any claim of “comprehensive” trade agreement is hollow without addressing rare earths. Until a framework exists to manage their flow transparently and cooperatively, every truce will be partial, every ceasefire tentative.
For now, the London agreement serves its political purpose: optics over substance. Yet, the rare earths dilemma looms large. It reminds us that diplomacy often leaves the most difficult issues untouched, precisely because they matter the most.
In a world still clinging to the rhetoric of globalisation, rare earths expose the underlying fragmentation. And unless multilateral frameworks catch up with geopolitical reality, these buried elements may well determine which economies rise — and which falter — in the years to come.
