China's Rare Earth Monopoly Triggers a U.S. 100% Tariff Threat
Last week, in response to China’s tightening of rare earth export controls,U.S. President Trump threatened an additional 100% tariff, triggering heightened volatility in global markets. To better understand the dynamics, consider the following:
China's dominant position: It controls 60–70% of rare earth mining, but dominates where it matters: 85–90% of processing and 90–95% of magnet manufacturing—the high-value segments that the U.S. and other Western nations can not quickly replicate. It currently restricts exports of 12 of 17 rare earths, including those most critical for defense, semiconductors and AI infrastructure.
Defense industry is significantly impacted: F-35 fighter jets require 418 kg of rare earths, Virginia-class submarines need 4,600 kg, and 78% of U.S. weapons systems depend on rare earth magnets. China refines 98% of dysprosium and 99% of terbium, essential for military-grade magnets that can survive extreme heat.
EVs and green energy need neodymium: A single wind turbine requires ~300 kg, and each EV motor ~4.5 kg. Neodymium isn't restricted yet, but if China adds it to the list, EV players and the renewables industry could quickly grind to a halt.
Few shorter-term options: The West is over-leveraged to China’s monopoly supplier position with no near-term alternative. For example, MP Materials, the leading U.S. player, may scale to 3,000 tonnes per year. China's largest producer, JL MAG, produced at least 25,000 tonnes last year.
OUR TAKE
Through 2030, China's leverage is structural, not cyclical. Expect export restrictions timed to geopolitical flashpoints (Taiwan, trade negotiations), waves of bankruptcies among undercapitalized firms, and consolidation around state-backed players.
Unlike energy markets, where there are multiple suppliers and strategic reserves, the rare earth materials market has one dominant source and no quick-fix alternatives. Access to these materials will determine which countries can build defense systems, manufacture EVs, and deploy renewable energy.
If recent actions by China and the U.S. are not saber-rattling, they signal a new landscape competition between them.