Rare Earth Supply Crisis: How US-China Trade War Threatens Global Tech Supply Chains

China’s near-monopoly on rare earth processing is the new battleground in the US-China trade war, threatening global supply chains for EVs, wind turbines, and high-tech defense. Learn why this chokepoint is critical and the 6 essential business risk management steps to protect your enterprise from crippling mineral shortages and price volatility.

Rare Earth Minerals: The Critical Chokepoint Fuelling the US-China Trade War

The global supply chain for Rare Earth Elements (REEs) is a major point of economic and geopolitical vulnerability, now intensifying the trade war between the US and China. These 17 elements are not actually rare in the Earth’s crust, but finding them in economically viable, concentrated deposits is unusual, and the processing expertise is highly consolidated. The world’s dependency on a single source for these materials—vital for high-tech industries and national security—has made them a powerful geopolitical leverage tool.

China’s Dominance: The Supply Chain Chokepoint

Rare earth minerals are indispensable in modern technology. They form the basis of powerful permanent magnets used in Electric Vehicles (EVs), wind turbines, smartphones, advanced military equipment (like missiles and fighter jets), and numerous other high-tech consumer electronics.

Predominant Sources and Control

The problem isn’t the physical mining of the minerals, but the complex and often environmentally taxing separation and processing into usable elements and magnets.

Stage of Supply Chain China’s Estimated Global Control

China Mining ∼70%
China Separation & Processing ∼90%
China Magnet Manufacturing ∼93%

China has held indisputable dominance over the rare earth supply chain since the 1990s, making it the primary global source of refined REEs. The US, which was once the leading global producer, now imports a significant portion of its rare earth oxides, much of it directly or indirectly sourced from China. This dominance provides Beijing with a potent economic leverage tool.

Rare Earths as a Weapon in the Trade War

The US-China trade war, initially focused on tariffs and intellectual property, has now fundamentally shifted to control over critical raw materials.

Geopolitical Leverage

China has weaponised its dominance by implementing export controls on rare earths and related processing technology. These actions directly target the US industrial and defense base, which relies on these materials.

Export Restrictions: China has expanded restrictions to include magnets containing even trace amounts of Chinese-sourced REEs, or products manufactured using Chinese refining technology. These new controls effectively grant China veto power over key global supply chains, including advanced semiconductors and EVs.

National Security Focus: Beijing justifies the moves by citing the need to “protect its national security and interests” and prevent the “misuse of rare earth materials in military and other sensitive sectors.” These controls force foreign companies, including those in India’s auto industry, to provide end-use certifications to ensure the materials aren’t re-exported to the US for military applications.

US Response: The US has retaliated with threats of steep tariffs on Chinese goods and is aggressively pursuing domestic production and ‘friend-shoring’ initiatives with allies like Australia, Canada, and Vietnam to diversify its supply chain away from China. This intense back-and-forth confirms that rare earths are not just a trade issue but a core strategic and national security concern.

6 Business Risk Management Tips for Supply Chain Resilience

Businesses reliant on products that use rare earths (like EV manufacturers, electronics firms, and defense contractors) must take proactive steps to mitigate this escalating supply chain crisis.

  1. Supply Diversification: Actively seek and activate alternative sources of REE ores, refining capacity, and finished components from politically stable regions (e.g., Australia, US domestic production, or other allied nations).
  2. Multi-Tier Risk Assessment: Go beyond direct suppliers (Tier 1) to map and assess risks across all tiers of your supply chain (Tiers 2 and 3) to identify where reliance on China’s REE processing truly lies.
  3. Strategic Stockpiling: Maintain a buffer stock of critical rare earth materials or high-value components to hedge against short-term disruptions, price spikes, and abrupt export license changes.
  4. Invest in Recycling/Circular Economy: Prioritise R&D and investment in RE-free substitutes and urban mining (recycling of rare earths from end-of-life products like batteries and magnets) to create a sustainable, non-China-dependent source.
  5. Conduct Scenario Planning: Run ‘what-if’ exercises based on geopolitical events (e.g., complete Chinese export ban, 100% US tariffs) to understand potential financial and operational implications and prepare rapid response plans.
  6. Continuous Monitoring & Traceability: Implement a robust supply chain risk management system to continuously monitor geopolitical, regulatory, and financial risks for all key suppliers and raw material sources.

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Rare Earth Supply Crisis: How US-China Trade War Threatens Global Tech Supply Chains

The Shadow of the Bear: Weaponising Fear for Economic Alchemy

Economic manipulation and potential consequences of geopolitical tensions

The air crackles. It’s not just geopolitical tension. It’s the subtle, insidious hum of economic machinery gearing up. We’ve seen this before, haven’t we? The post-2008 scramble, the pandemic’s deluge of freshly minted currency. Now, a new spectre looms – Russia. And with it, a narrative that could justify trillions in new debt, a narrative that threatens to further erode the very foundations of our financial stability. We’re talking about inflation, busting the budgets of families, and the silent theft of wealth.

My time here is short, what can I do!?

Let’s cut to the chase. Environmental taxes, have hit a ceiling. Public tolerance is waning. After the financial crisis and the pandemic, the well of excuses for reckless borrowing is dry. So, what’s the next act? A resurgent Russia, a convenient bogeyman. To fuel the military industrial complex, and to pump trillions into stagnant economies. New British Defence Bonds, EU Defence Bonds, they’re being whispered about. I’m telling you, it’s not a coincidence. It’s a calculated move.

The Inflationary Tsunami: Money Printing’s Deadly Toll

The link between excessive money printing and inflation isn’t a theory. It’s a brutal reality. Central banks, in their zeal to stimulate economies, have flooded markets with liquidity. This deluge of new currency dilutes the value of existing money. A simple supply and demand equation. More money chasing the same amount of goods and services? Prices surge. I’ve seen it, you’ve seen it. Your buying power shrinks. Your savings erode. It’s a silent tax, a hidden levy on everyone.

The proposed Defence Bonds? They’re just another twist in this inflationary spiral. Governments will borrow massive sums, further increasing the money supply. This, inevitably, will exacerbate inflationary pressures. The cycle deepens: more debt, less value, higher prices. The average citizen, the small business owner, they’re the ones left to pick up the pieces.

Nine Pillars of the Argument: Why This Rings True

  1. The Exhaustion of Other Narratives: Environmental taxes have reached their limits. Pandemic spending is unsustainable. A new, more potent justification is needed.
  2. Geopolitical Instability as a Convenient Tool: Russia’s actions, however reprehensible, provide a ready-made excuse for increased military spending and economic intervention.
  3. The Military-Industrial Complex’s Appetite: Defence contractors and related industries stand to gain immensely from increased military budgets, creating a powerful lobby for further spending.
  4. The Desire to Stimulate Stagnant Economies: Governments are desperate to kickstart growth, and military spending is seen as a way to inject capital into key sectors.
  5. The Appeal of Sovereign Debt: Defence bonds offer a seemingly safe way for governments to borrow vast sums, with the promise of future returns.
  6. The Erosion of Public Trust: The constant cycle of crises and bailouts has weakened public trust in economic institutions, making it easier to push through controversial policies.
  7. The Normalisation of Extraordinary Measures: The pandemic normalised unprecedented levels of government intervention, paving the way for further economic manipulation.
  8. The Power of Fear: Fear is a potent motivator. The perceived threat from Russia can be used to justify policies that would otherwise be unacceptable.
  9. The Delayed Impact of Inflation: The full effects of excessive money printing are often delayed, allowing governments to push through policies with minimal immediate backlash.

The Theatre of Threat: Manufacturing Consent

How do you convince a skeptical public to support massive military spending and increased debt? You create a sense of urgency, a palpable fear. You stage a theatre of threat. False red flags, carefully crafted narratives, and a compliant media.

  • Cyberattacks and Disinformation: Fabricated cyberattacks on critical infrastructure can create a sense of vulnerability, justifying increased security spending. Disinformation campaigns can sow fear and distrust, painting Russia as an imminent threat.
  • Staged Military Exercises: Highly publicised military exercises near borders can create a sense of tension and imminent conflict, driving public support for increased defence spending.
  • Intelligence Leaks: Carefully timed leaks of “intelligence” about Russian aggression can reinforce the narrative of an imminent threat, justifying drastic measures.
  • Media Amplification: A compliant media can amplify these narratives, creating a sense of widespread fear and urgency.
  • Political Rhetoric: Politicians can use inflammatory rhetoric to paint Russia as an existential threat, rallying public support for increased military spending.
  • Economic Sanctions and Countermeasures: Escalating economic sanctions and retaliatory measures can create a sense of economic warfare, further fuelling the narrative of conflict.

Protecting Your Assets: Navigating the Storm

In this environment of economic uncertainty and potential instability, businesses and consumers must take proactive steps to protect their assets.

  1. Diversify Investments: Don’t put all your eggs in one basket. Diversify your investments across different asset classes, including real estate, commodities, and foreign currencies.
  2. Hedge Against Inflation: Invest in assets that tend to hold their value during inflationary periods, such as gold, silver, cryptocurrency and real estate.
  3. Manage Debt Wisely: Avoid taking on excessive debt, especially variable-rate debt that could become more expensive as interest rates rise.
  4. Build Emergency Funds: Maintain a substantial emergency fund to cover unexpected expenses and economic downturns.
  5. Secure Supply Chains: Businesses should diversify their supply chains to reduce reliance on vulnerable regions and ensure continuity of operations.
  6. Invest in Cybersecurity: Protect your data and systems from cyberattacks, which are likely to increase in frequency and sophistication during periods of geopolitical tension.

The Power of War: A Transfer of Wealth and Control

Wars, despite their devastating human cost, are often a catalyst for significant shifts in power and wealth. Governments, during times of conflict, seize extraordinary powers, often at the expense of individual liberties.

  • Increased Government Control: Governments expand their control over the economy, industry, and media, often under the guise of national security.
  • Suspension of Civil Liberties: Civil liberties, such as freedom of speech and assembly, may be curtailed in the name of national security.
  • Nationalisation of Industries: Key industries may be nationalised to ensure the production of essential goods and services.
  • Rationing and Price Controls: Governments may impose rationing and price controls to manage scarce resources.
  • Increased Surveillance: Surveillance of citizens may increase under the guise of counterterrorism and national security.

The Winners and Losers: Following the Money

Wars create winners and losers. The military-industrial complex, defence contractors, and related industries often see their profits soar. Governments, while burdened with debt, gain increased control over their economies and societies.

  • Defence Contractors: Companies that produce weapons, military equipment, and related services see a surge in demand and profits.
  • Financial Institutions: Banks and financial institutions that underwrite government debt and manage defence contracts also benefit.
  • Governments: Governments gain increased control over their economies and societies, often at the expense of individual liberties.
  • The Average Citizen: The average citizen, burdened with increased taxes, inflation, and potential loss of civil liberties, often bears the brunt of the cost.

In Conclusion:

The spectre of Russian aggression is being weaponised to justify massive economic interventions, further fuelling inflation and eroding the value of hard-earned wealth. This is not a conspiracy theory; it’s a pattern of behaviour, a playbook that has been used throughout history. Businesses and consumers must be vigilant, proactive, and prepared to navigate the turbulent economic waters ahead. Diversification, hedging, and prudent financial management are essential for survival. And always, follow the money.

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  1. Economic impact of new British defence bonds on UK inflation rates: the economic consequences of the proposed bonds.
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The Shadow of the Bear: Weaponising Fear for Economic Alchemy