From Mountain Pass to Monopoly

From the device you’re reading this on to the electric vehicles driving down the street, rare earth elements (REEs) have become ubiquitous in our daily lives. The heat-resistant, metallic, and phosphorescent characteristics of these elements (ranging from yttrium to scandium) are at work in electronics, automobiles, lighting, medical equipment, and much more. Economically, the REEs industry has become a backbone of the global economy. They have become critical parts of every modern system from night vision to fighter jets. Since the 1980s, however, China has come to dominate the REE industry, allowing the Chinese Communist Party (CCP) to use the valuable resources as a geopolitical tool. To secure its own national security and that of its allies, the United States must work towards REE independence. 

These elements have also become critical in creating modern armed forces through their widespread use in guidance, targeting, radar, night vision, and sonar systems. The modern military systems that the United States relies on to defend both itself and its allies all require massive amounts of REEs. For example, the production of the F-35 through the F-35 program shared by the United States and its partners, such as the UK, Israel, and Italy, has become critical to allied air power. Its multirole capabilities allow allied nations to carry out air-to-air interception, electronic warfare, ground strikes, close air support, and intelligence gathering. This makes it an indispensable tool on the modern battlefield. F-35s use around 418 kilograms of REEs across their arsenal, including in guided missiles and laser targeting systems. Other branches of the military also heavily rely on REEs. In the Navy, for example, REEs are used extensively in the Virginia-class nuclear-powered fast attack submarine. The Virginia-class submarine is a cornerstone of U.S. power projection. Its stealth and nuclear reactor allow it to traverse vast distances to carry out anti-submarine warfare and strikes using an arsenal of cruise missiles. For instance, in 2018, the Virginia-class submarine U.S.S. John Warner carried out strikes in Syria using six Tomahawk cruise missiles against chemical warfare facilities. Additionally, sonar systems used on many submarines use zirconate to locate and identify objects underwater, gaining situational awareness. The main arsenal of a submarine, including its array of torpedoes and cruise missiles, relies extensively on REEs to function. 

Due to the critical nature of REEs, the United States actively sought to dominate the industry during the Cold War. From 1965 to 1985, the United States held its position as the single largest producer of REEs during the Mountain Pass Era. The name comes from the famous Mountain Pass mine in California, which made up the vast majority of global REEs production. Subsidized by the U.S. government through its massive defense spending and demand for REEs to drive a Cold War arms race, the mine saw significant prosperity from providing the materials necessary for both commercial and defense applications. Through its control of the global market, the U.S., NATO, and major non-NATO allies were able to power military buildups to ensure deterrence against communist aggression and maintain their sovereignty. As the Cold War surged forward, the benefits of the United States having easy and independent access to REEs became clear. High-powered American jets such as the F-15 air dominance fighter extensively use REEs in their electronic systems. Platforms such as the F-15 allowed the U.S. and coalition allies to dominate against Soviet made weaponry. 

However, by going along with wider deindustrialization and globalization trends, the U.S. domestic REEs industry has steadily declined. Global competitors, primarily China, now possess massive advantages over American REE production. The incomprehensive environmental laws in China for REEs extraction and refinement have lowered costs dramatically for Chinese companies. For example, at the Baotu mine in Inner Mongolia, where the majority of the world’s REEs production currently happens, companies have ejected massive amounts of toxic waste into artificial lakes, causing massive environmental damage. Meanwhile, in the U.S., firms need to spend money on compliance as well as wait years for mining permits that require a strict adherence to environmental regulations. The other signatures of Chinese economic competitiveness have also come into play: cheap labor and enormous state subsidies. Lower costs for labor in China have supported the REE industry as well as extensive CCP subsidization of REE extraction and research. For REE firms in China, up to 20 percent of research and development costs for pursuing more efficient means of extraction, shipping, and refining are covered by the government. However, no such program exists in the United States. The results of this stark contrast in approach are clear: 91 percent of refining activity is concentrated in China, as well as 94 percent of magnet production, which essentially provides a total monopoly. 

However, this raises the question: why is China pursuing this policy? Western tariffs on Chinese REEs dropped significantly, allowing China to leverage its advantages in REE competition. Deng Xiaoping and successive Chinese leaders understood that China’s REEs industry would not only be extremely economically important but also create massive geopolitical leverage. The push to export and produce REEs is summed up by Deng Xiaoping himself: “The Middle East has oil; China has rare earths.” At the same time, western countries sabotaged their own REEs production through environmental regulations. In 2002, the Mountain Pass mine went offline, since it no longer remained financially viable as a result of new American environmental policy. China hasn’t been reluctant to use its leverage in the REEs industry. The CCP has used its REE monopoly to pressure other nations. During the 2010 dispute over the Senkaku/Diaoyu islands, China used exports of REEs to Japan as leverage, causing prices to spike dramatically when they cut off exports. After the implementation of tariffs in 2025 by the United States, the CCP used this tactic again by cutting a set of REE exports to the U.S. before swiftly restoring them after a tariff pause. In 2025, the Chinese government further strengthened its hand in using REEs as a political tool. The Ministry of Commerce now requires exporters to acquire approval from the Chinese government before exporting, adding another layer of national security concerns. Since REEs are so ubiquitous in the economy and utilized in many defense platforms, a cutoff of REE shipments to the United States could lead to massive price spikes in the U.S., which would fuel economic uncertainty. Industries from electronics to telecommunications to automobiles and many others that form the core of the U.S. economy would be heavily impacted by Chinese action over REEs. Under Xi Jinping, China has taken a much more confrontational path to addressing the United States. The Belt and Road Initiative working to expand China’s international presence; the militarization of the first island chai;, and support of the Russian war effort in Ukraine all place the current CCP in an opposing position to the United States. As the U.S. and China clash on many issues, including trade, Taiwan, and the first island chain, the risk of a Chinese freeze of REE exports allows the country outsized leverage.  

It is clear that this issue must be addressed decisively and immediately by the United States, the private sector, and allied governments. To allow one nation to hold this much leverage over a sector that impacts everything from the economy to defense is a threat to national security. In order to revive domestic REEs extraction, America must look towards the most viable source within the U.S.: the California Mountain Pass mine. Additionally, predatory tactics by China to artificially collapse prices and sink competitors must be stopped in order for a robust domestic industry to flourish. To do so, the U.S. needs to deter and solve the issue of price manipulation. The US government should provide a baseline price subsidy similar to how it does for agriculture, in which subsidies are provided if the average national price drops below a certain level. Adopting a similar system for the American REEs industry would help American producers stay afloat even if China decided to artificially crash prices once again. Second, the U.S. government must continue the process of weaning American producers off of Chinese refineries and building a new production line within the United States. President Trump’s new one billion dollar pledge for the REEs industry, which builds up a REE supply chain in the U.S. and supports US REE refinement, is a great step in the right direction. Overtaking China, however, will not happen overnight. However, it is possible for America to work to regain its REE independence through sound policy and a reinvigoration of the industry.