How the US gave up its edge to China in processing vital rare earth minerals – and what that’s costing

Rare earth elements are a group of 17 metals essential for modern technology, despite their name suggesting scarcity. Elements like neodymium, cerium, and erbium are found in everyday devices such as smartphones, electric vehicles, and military equipment like F-35 fighter jets. For example, neodymium is used in magnets for phone vibrations, while cerium polishes screens and reduces vehicle exhaust. These metals are not actually rare in the Earth’s crust—cerium is as abundant as copper—but separating them from raw ore is complex and costly. This separation process is dominated by China, which in 2024 mined 60% of the world’s rare earths for magnets and processed 91% of global supply. The U.S. has its own rare earth deposits, like the Mountain Pass mine in California, but lacks large-scale processing facilities.

China’s control over rare earth processing gives it significant geopolitical leverage. In 2025, China imposed export controls on rare earths, including a rule that any factory abroad using Chinese-origin rare earths or technology (even in trace amounts) requires a Chinese license to export products. These controls were temporarily suspended until November 10, 2026, following a deal with the U.S. However, some restrictions remain, such as licensing for seven heavier rare earths and a June 2026 ban on selling dual-use goods (items with civilian and military applications) to 10 U.S. companies, including rare earth producers MP Materials and USA Rare Earth. This leverage allows China to slow or halt rivals’ growth, as seen when automaker Ford had to idle a plant for a week in 2025 due to supply shortages.

The U.S. once led rare earth production but lost its edge due to environmental concerns and lower costs abroad. California’s Mountain Pass mine, a major source until the 1980s, closed in 2002 after radioactive wastewater leaks. While it reopened in 2017 under MP Materials, the U.S. still imported over two-thirds of its rare earths as recently as 2025. Rebuilding domestic processing is slow because China holds a near-monopoly on expertise and technology. The U.S. government has committed over $7 billion since April 2025 to revive the industry, including a $400 million investment in MP Materials and a $277 million grant plus $1.3 billion loan to USA Rare Earth. However, China’s export rules and lack of shared technology hinder progress.

Rebuilding a U.S. rare earth supply chain faces multiple hurdles. China employs thousands of experienced engineers and developed industrial-scale separation technologies, which it does not share. The U.S. has far fewer experts, and separation processes produce hazardous waste, including acidic and sometimes radioactive residues. The Pentagon estimates rebuilding the full supply chain (mining, separation, and magnet manufacturing) could take up to 15 years. Even with government funding, MP Materials does not expect its new magnet plant to begin testing until 2028. Alternative strategies, like partnering with allies such as Australia or Japan, could reduce risks but are also affected by China’s suspended export rules.