China maintains a formidable chokehold on the global supply of rare earths, minerals indispensable for modern electronics, automotive industries, and defense systems. Controlling approximately 60% of the world's rare earth production and nearly 90% of its refining capacity, China has recently intensified its leverage. In April, Beijing imposed export controls on seven rare earth elements and permanent magnets, a move partly in response to tariffs levied by the US. This strategic maneuver has starkly exposed the vulnerabilities of nations lacking domestic refining capabilities, as highlighted by experts who warn of global economic repercussions if these exports cease.

The repercussions of China's tightened grip have hit American industries severely. US carmaker Ford, for instance, was compelled to scale back SUV production in Chicago due to shortages. Similarly, auto parts suppliers like Aptiv and BorgWarner are actively developing rare-earth-free motors to mitigate supply constraints. Concerns are mounting within the US automotive sector, with some experts predicting a potential standstill for assembly plants. A survey by the American Chamber of Commerce in China indicated that three-quarters of US firms anticipate their rare earth stocks to be depleted within three months. While China has agreed to expedite export license approvals for the US, a substantial backlog persists, and it remains unclear if military suppliers, crucial for fighter jets and missile systems, are included in this arrangement. This strategic use of rare earths as a geopolitical instrument by China is not unprecedented; a similar halt in exports to Japan in 2010 during a territorial dispute caused price surges and exposed significant supply chain risks.

The impact of China's rare earth curbs extends beyond the United States to Europe, which depends on China for 98% of its rare-earth magnets used in auto components, fighter jets, and medical imaging devices. The European Association of Automotive Supplies (CLEPA) reported significant disruptions, including production line and plant shutdowns across Europe due to depleting inventories. Experts emphasize the challenge for Western nations to match China's integrated mine-to-magnet supply chain, deeming a complete decoupling unthinkable in the short term. However, the European Commission is pursuing a coherent industrial strategy under the Critical Raw Materials Act, aiming to produce 7,000 tons of EU-based magnets by 2030, with processing plants slated to open in Estonia later this year and in France next year. Despite China proposing a 'green channel' for expedited approvals for EU firms, experts caution that approvals could still take up to 45 days.

Even with the world's fifth-largest rare-earth reserves, India contributes less than 1% to the global supply, primarily due to insufficient refining capacity for high-tech applications. India, too, relies on Chinese exports, which have faced restrictions. New Delhi has initiated efforts to diversify its supply through agreements with the US, Australia, and Central Asian nations, though progress has been slow. To safeguard domestic supply, India has instructed its state-run miner IREL to cease exports of domestically produced rare earths, including to Japan, to prioritize national producers.

In response to China's enduring dominance, G7 leaders met in Canada and tentatively agreed on a comprehensive strategy to address critical rare-earth shortages. Their 'G7 Critical Minerals Action Plan' outlines a joint response to deliberate market disruptions and a commitment to diversify production and supply chains to protect economic and national security. Beyond the G7, several countries are advancing efforts to boost rare-earth production. After China's 44 million tons, Brazil, India, and Australia hold the next largest deposits, collectively around 31.3 million tons, with an additional 20 million tons recently discovered in Kazakhstan. The US and Australia are at the forefront of ramping up their mining and processing output, while other nations' projects are in earlier stages, requiring substantial investment, environmental considerations, and 5-10 years for operationalization.

Greenland has emerged as another promising future source, despite its harsh climate. The Tanbreez Project in southern Greenland, with an estimated 28.2 million tons of minerals, was ranked as a top rare earth project in 2023. The US Export-Import Bank is poised to approve a significant loan to the firm operating Tanbreez, marking a key overseas investment in mining. The EU has also identified 25 critical raw materials, including rare earths, in Greenland, underscoring its growing importance. Nevertheless, until alternative rare-earth supplies are substantially scaled up, China is expected to continue wielding this vital resource as a powerful geopolitical weapon, maintaining its influence over global industries and nations. Experts remain skeptical about overcoming China's market dominance, citing its considerable cost advantage, which could easily undermine competitive efforts once export controls are relaxed.