In a development that has alarmed policymakers and corporate leaders alike, a single strategic mineral mined and refined primarily in China has emerged as a potential $700 billion threat to the U.S. economy.

The mineral—refined rare earth elements (REEs), particularly heavy rare earths such as dysprosium and terbium—plays a critical role in producing everything from advanced military hardware and renewable energy systems to smartphones, electric vehicles, and precision-guided missiles.

As U.S.-China tensions escalate over trade, technology, and Taiwan, Beijing’s tightening grip over these essential materials is raising the specter of a supply shock that could cripple entire sectors of the American economy.

Below, we explore why this mineral is so vital, why China dominates the market, and what the consequences could be if access is restricted.

What Are Rare Earth Elements, and Why Do They Matter?

Rare earths are a group of 17 chemically similar metals used in small but indispensable quantities to manufacture high-tech devices.

Two heavy rare earths—dysprosium and terbium—are especially critical because they enable high-performance magnets that retain their strength under extreme heat and stress. These magnets are essential in:

Electric vehicle motors (Tesla, GM, Ford)

Wind turbine generators

F-35 fighter jets and other defense platforms

Guidance systems for precision munitions

Consumer electronics

A Department of Defense study concluded that without access to dysprosium and terbium, the U.S. military’s ability to build advanced weapons systems could be severely compromised.

China’s Dominance: A Strategic Advantage

While rare earth deposits exist in the U.S., Australia, and Africa, China controls about 70% of global production and over 85% of the world’s refining capacity.

This chokehold results from decades of deliberate industrial policy:

State subsidies supported Chinese miners to undercut competitors.

Environmental regulations forced Western producers to scale back.

Massive investment in refining created a supply chain no other country has matched.

In other words, it is not simply that China has the raw materials—it has the processing infrastructure that turns ore into usable compounds, a capability that can take decades and billions of dollars to replicate.

The $700 Billion Threat

Industry analysts estimate that U.S. sectors dependent on rare earth magnets generate $700 billion in annual economic output—including:

Automotive manufacturing

Aerospace and defense

Renewable energy

Electronics and telecommunications

If China were to curtail exports or impose quotas, the ripple effects could be catastrophic:

✅ Production delays across multiple industries
✅ Skyrocketing prices for electric vehicles and clean energy projects
✅ Defense readiness compromised due to supply gaps in advanced weapons
✅ Job losses and inflation in sectors already under pressure

For example, just a 30% reduction in Chinese exports could send rare earth prices soaring by over 400%, according to a recent report by Benchmark Mineral Intelligence.

Recent Signals of Escalation

In 2023, Beijing enacted stricter export licensing requirements for gallium and germanium—two other strategic metals—and hinted that rare earths could be next.

This year, Chinese state media outlets have openly discussed “weaponizing rare earth exports” as leverage in the trade war with Washington.

The message is clear: China holds the cards, and it is willing to use them if strategic competition intensifies.

How the U.S. Is Responding

Recognizing the danger, the U.S. government has begun funding domestic projects to rebuild mining and refining capacity.

Key initiatives include:

$800 million in grants to MP Materials, which operates the Mountain Pass mine in California

Department of Defense contracts to develop rare earth separation facilities

Partnerships with Australia and Canada to diversify supply

However, experts warn these efforts are still years away from closing the gap, leaving the U.S. vulnerable in the near term.

Industry Voices Sound the Alarm

Corporate leaders have been blunt about the stakes.

Mary Barra, CEO of General Motors, said in a recent earnings call:

“If rare earth supplies are disrupted, it would set back our EV ambitions by years.”

Similarly, Lockheed Martin’s CFO noted:

“Our supply chain resilience depends on stable access to these materials. Without them, there is no modern defense industry.”

The Bigger Picture: Economic and Geopolitical Leverage

China’s control over rare earths is part of a larger pattern: strategic dominance of critical minerals such as lithium, cobalt, and graphite.

While some policymakers focus narrowly on tariffs and semiconductor bans, experts argue that resource security could ultimately prove more decisive in the long-term balance of power.

As geopolitical rivalries deepen, the question is no longer whether rare earths will be used as leverage—but when and how severely.

Conclusion

In the coming years, this Chinese mineral—and Beijing’s willingness to weaponize its supply—may emerge as the single most significant factor shaping the trajectory of U.S. economic competitiveness, clean energy adoption, and defense preparedness.

The U.S. faces a stark choice: accelerate efforts to build secure supply chains or risk a crisis that could cost hundreds of billions of dollars and reshape global power dynamics.