Summary of "China's Upper Hand: Rare Earth Metals" – The Daily
Release Date: June 10, 2025
Introduction
In this episode of The Daily, hosted by Natalie Kitroeff, the focus is on the pivotal role of rare earth metals in the ongoing trade tensions between the United States and China. Natalie is joined by her colleague, Keith Bradshaw, who provides an in-depth analysis of how the U.S. became heavily reliant on China for these critical materials and the implications of China’s recent export restrictions.
The Significance of Rare Earth Metals
Natalie Kitroeff introduces the topic by highlighting that the central issue in the U.S.-China trade war revolves around a select group of rare earth metals. These elements are not only scarce but also crucial for both industrial and military applications. China’s recent decision to restrict exports of these metals poses significant threats to U.S. industries and national security.
Keith Bradshaw elaborates on what rare earths are, explaining that while some, like lanthanum and cerium, are relatively common and used in applications such as oil refining and glass polishing, others like dysprosium, gadolinium, and samarium are much rarer and predominantly controlled by China. He emphasizes their importance in manufacturing powerful magnets essential for electric vehicles, aircraft, and military hardware. For instance, samarium is vital for producing magnets that can withstand high temperatures, making it indispensable for fighter jets and missiles.
“These rare earths now are critical both to the economy and to national security.” [05:19]
Historical Context and China's Dominance
Natalie probes into how the U.S. became dependent on China for rare earths. Keith traces the history back to the 1980s and 1990s when the United States, alongside Japan, led in rare earth mining and magnet technology. The Mountain Pass mine in California was the primary source until it shut down in 1998 due to environmental issues and high cleanup costs.
“China had been ramping up its own rare earth production through the 1980s through the 1990s, doing it very cheaply without a lot of environmental compliance at all.” [06:44]
As China's production surged, legal and illicit operations proliferated. Keith describes the rudimentary and often illegal methods used in China’s rare earth mining, involving simple techniques like "bucket chemistry" that rely on corrupt local officials to bypass environmental regulations.
“It's very straightforward. It's called bucket chemistry... All it really takes is a corrupt local politician willing to look the other way.” [10:41]
The 2010 Embargo and Its Aftermath
In 2010, China leveraged its dominance by imposing an embargo on rare earth exports to Japan amid a territorial dispute, causing significant disruption. Keith explains that Japan responded by investing heavily in alternative sources and stockpiling rare earths, effectively reducing its dependence on China.
“The embargo was so traumatic that the government and the companies said never again. The companies began pouring money into building stockpiles...” [16:01]
Contrastingly, the U.S. struggled to maintain momentum in developing domestic sources. Efforts to reopen the Mountain Pass mine were thwarted by a glut of cheap rare earths flooding the market from China, leading to its bankruptcy in 2015.
“The mine ended up closing again the next year in 2015, and went bankrupt.” [18:33]
Current Scenario and U.S. Response
Fast forward to 2025, China has again restricted exports of rare earths, significantly impacting U.S. industries and military capabilities. In response, the U.S. has exerted pressure through various measures, including halting sales of jet engines to Chinese competitors and limiting visa issuances to Chinese students.
“The US has stopped selling jet engines... and also mobilized a battalion of 700 Marines to the city.” [20:06]
“Almost entirely, actually.” [20:58]
Keith assesses that while these pressures have led China to resume some exports, the volumes remain insufficient for long-term U.S. self-sufficiency.
“China may not allow enough rare earths to be exported for people to build stockpiles...” [21:00]
Long-Term Solutions and Industrial Policy
The dialogue shifts to potential solutions. Keith argues that achieving self-sufficiency requires significant industrial policy changes in the U.S., including:
- Domestic Production: Reestablishing rare earth mining and processing facilities.
- Long-Term Contracts: Encouraging U.S. companies to commit to long-term agreements with non-Chinese suppliers, even at higher costs.
- Tariffs: Implementing sustained tariffs on Chinese rare earth imports to incentivize domestic and allied production.
“A long term solution requires... producing these kinds of rare earths in the United States...” [23:44]
“Another way you can force them to buy American magnets... to discourage customers in the United States from choosing Chinese suppliers...” [24:10]
Natalie connects this scenario to broader geopolitical strategies, suggesting that Trump’s previous policies may have inadvertently exacerbated the dependence on China by targeting their strategic vulnerabilities.
“Trump kind of did the worst thing possible for the American manufacturers that he says he's trying to help...” [24:38]
Keith expands on the potential shift in global manufacturing dynamics, where companies might relocate production away from China to regions like Mexico, Vietnam, or India to mitigate risks associated with over-reliance on Chinese rare earths.
“We might see companies... move our purchasing contracts to Mexico and Vietnam and India...” [26:26]
Conclusion
The episode underscores the critical vulnerability of the U.S. and allied nations due to dependence on China's rare earth metals. It highlights the urgent need for strategic industrial policies to rebuild domestic capacities and diversify supply chains to enhance national security and economic resilience.
“This is proving it all over again. In fact, you could make a case there are few worse examples of misplaced industrial policy than how America has handled its rare earths dependence.” [27:43]
Key Takeaways
- Rare Earth Metals: Essential for modern technology and military applications, with China controlling the majority of their supply.
- Historical Dependence: The decline of U.S. rare earth production in the late 1990s led to increased reliance on China.
- Geopolitical Leverage: China's export restrictions serve as a strategic tool in trade negotiations.
- Need for Policy Intervention: Reestablishing domestic production and diversifying supply chains are crucial for reducing vulnerability.
- Global Implications: Other countries reliant on U.S. defense exports may also face challenges due to rare earth restrictions.
Notable Quotes
- “These rare earths now are critical both to the economy and to national security.” – Keith Bradshaw [05:19]
- “It's like making coffee... the hill is like coffee grounds.” – Keith Bradshaw [09:34]
- “China might have bungled this in a different way...” – Keith Bradshaw [26:12]
- “Few worse examples of misplaced industrial policy than how America has handled its rare earths dependence.” – Keith Bradshaw [27:43]
This comprehensive exploration by The Daily illuminates the intricate web of global dependencies on rare earth metals and the pressing need for strategic reforms to safeguard economic and national security interests.