China’s dominance over rare earth elements (REEs) and critical minerals has become a geopolitical flashpoint, with the nation controlling roughly 60% of global mining and 85-90% of processing capacity. These materials—vital for everything from electric vehicle (EV) motors to fighter jets—have given Beijing significant leverage in its trade war with the West, particularly the United States. Despite efforts to build domestic supply chains, the U.S. faces steep regulatory hurdles, limited processing capabilities, and a timeline of years to achieve self-sufficiency. However, the Trump administration’s actions in 2025 have sparked some progress, and investors are eyeing opportunities in a handful of companies poised to capitalize on this critical industry. Here’s a deep dive into the current landscape, challenges, recent gains, and what investors should watch for.
China’s Stranglehold and the West’s Vulnerability
Rare earths, a group of 17 elements including neodymium, dysprosium, and samarium, are essential for high-tech manufacturing. They power magnets in EVs, wind turbines, and defense systems like the F-35 fighter jet. China’s grip tightened in April 2025 when it imposed export restrictions on seven REEs—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—in retaliation for U.S. tariffs under President Trump. This move, requiring special export licenses, disrupted supply chains, with companies like Ford temporarily halting production due to magnet shortages.
The U.S. relies on China for about 70% of its rare earth imports, and domestic processing is virtually nonexistent for heavy REEs. China’s decades-long investment in mining and refining, coupled with lax environmental standards, has made it uneconomical for Western competitors to keep pace. A 2010 export ban to Japan and recent curbs on gallium and germanium underscore Beijing’s willingness to weaponize its dominance.
Regulatory Hurdles in the United States
Building a domestic rare earth supply chain is a daunting task, hampered by regulatory and economic barriers:
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Permitting Delays: Mining and processing projects face lengthy environmental reviews under the National Environmental Policy Act (NEPA). Even with streamlining efforts, permits can take years, delaying projects like NioCorp’s $1.2 billion Nebraska mine.
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Environmental Concerns: Rare earth processing is notoriously polluting, requiring toxic chemicals like ammonium sulfate. The U.S. offshored much of this industry to China decades ago to avoid environmental backlash, and modern regulations make it costly to rebuild.
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Lack of Expertise: The U.S. has seen a decline in mining engineering graduates, limiting the skilled workforce needed for rapid expansion.
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Economic Viability: Thin profit margins and China’s ability to suppress global prices deter investment. Without government subsidies or guaranteed offtake agreements, private companies struggle to compete.
These hurdles mean that even with significant investment, a fully integrated U.S. supply chain could take a decade or more to rival China’s.
Key U.S. Critical and Rare Earth Mineral Processing Efforts
Despite challenges, the U.S. is making strides in developing domestic capabilities:
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Mountain Pass Mine (MP Materials): The only operational U.S. rare earth mine, located in California, produces light REEs like neodymium and praseodymium. MP Materials is expanding into processing and magnet production, with a Fort Worth, Texas, facility set to produce 1,000 tons of neodymium-iron-boron magnets annually by late 2025. However, this is a fraction of China’s 138,000-ton capacity.
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USA Rare Earth: In January 2025, USA Rare Earth produced a 99.1% pure dysprosium oxide sample from its Round Top deposit in Texas, a milestone for heavy REE processing. Commercial-scale production remains years away.
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NioCorp Developments: NioCorp’s Nebraska project aims to mine and process rare earths, but financing remains a hurdle. The company’s stock fell 8.1% after China’s export curbs, reflecting investor concerns about short-term viability.
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Biomining Innovations: Startups are exploring eco-friendly processing methods, such as biomining with microorganisms, backed by National Science Foundation grants. These technologies are promising but not yet scalable.
The Department of Defense (DOD) has invested over $439 million since 2020 to build a “mine-to-magnet” supply chain, targeting self-sufficiency by 2027. However, experts warn this goal is ambitious given current limitations.
Trump Administration Gains in 2025
The Trump administration has prioritized reducing reliance on China, achieving notable progress in 2025:
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Trade Deal with China: In June, Trump announced a tentative agreement to resume Chinese REE and magnet exports after two months of disruptions. Negotiated in London, the deal followed a 90-day tariff truce in May. While not a long-term solution, it eased immediate supply chain pressures for automakers and defense contractors.
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Executive Order 14241: This order streamlined permitting for domestic mineral projects and invoked the Defense Production Act (DPA) to fund mining and processing. MP Materials and Lynas Rare Earths are among the beneficiaries, with fast-tracked support for processing facilities.
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Tariff Exemptions: The administration exempted critical minerals from tariffs, encouraging domestic production without inflating costs. This move, combined with DPA funding, has spurred investor interest in U.S. projects.
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International Partnerships: Trump has explored deals with Ukraine and Greenland for alternative REE supplies, though tensions with allies and logistical challenges remain.
These actions have mitigated short-term crises, but experts caution that China’s licensing regime remains a “permanent” threat, allowing Beijing to throttle exports at will.
What Investors Should Look For
Investors eyeing the rare earth sector should focus on companies with strong fundamentals, government backing, and clear paths to production. Key considerations include:
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Government Support: Companies receiving DOD or DPA funding, like MP Materials and Lynas Rare Earths, are safer bets. MP Materials, for instance, secured $9.6 million in 2020 and $35 million in 2022 for its Mountain Pass and Fort Worth facilities. Look for firms tied to Executive Order 14241 or similar initiatives.
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Vertical Integration: Companies building end-to-end supply chains—mining, processing, and magnet production—are more resilient. MP Materials’ move into magnet manufacturing and USA Rare Earth’s processing advancements are examples.
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Proven Resources: Firms with high-grade deposits, like USA Rare Earth’s Round Top or NioCorp’s Nebraska project, offer long-term potential. However, verify financing and permitting progress to avoid overhyped projects.
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Partnerships with End Users: Companies with offtake agreements, such as MP Materials’ deal with General Motors, reduce market risk. These partnerships signal demand and revenue stability.
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Innovation Edge: Startups developing eco-friendly processing, like biomining firms, could attract venture capital but carry higher risk due to unproven scalability.
Top Picks:
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MP Materials ($MP): As the only major U.S. producer, MP benefits from government support and a clear expansion plan. Its stock surged after China’s export curbs, and analysts see upside as domestic magnet production ramps up.
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USA Rare Earth: Its dysprosium oxide breakthrough and Texas focus make it a speculative but promising play for heavy REEs.
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NioCorp Developments ($NB): Riskier due to financing challenges, but its Nebraska project could yield significant returns if fully funded.
Investors should be cautious of volatility. China’s ability to manipulate prices and export licenses can depress global markets, as seen in stock fluctuations for NioCorp and others. Diversifying across companies with different risk profiles and monitoring policy changes are critical.
Conclusion
China’s “death grip” on rare earth minerals exposes the West’s vulnerability, and closing the gap will take years due to regulatory, environmental, and economic challenges. The U.S. is making progress through projects like MP Materials’ Mountain Pass and USA Rare Earth’s Round Top, but scaling these efforts requires sustained investment and policy support. The Trump administration’s 2025 trade deal, permitting reforms, and DPA funding have provided short-term relief and long-term momentum, but reliance on China persists. For investors, companies with government backing, integrated supply chains, and strategic partnerships offer the best opportunities in this high-stakes sector. As the trade war evolves, staying informed on policy shifts and technological breakthroughs will be key to navigating this critical market.
Disclaimer: This article is for informational purposes only and not investment advice. Always conduct your own research before investing.