The Rare Earth War: How to Profit from the U.S.-China Supply Chain Battle

The U.S.-China trade war isn't just about tariffs—it's a high-stakes battle for control of the minerals that power modern technology. Rare earth elements (REEs), critical for everything from smartphones to missiles, have become the ultimate geopolitical chess piece. And right now, China is holding all the pieces. But for investors, this crisis is also an opportunity. Let's dive into the chaos—and where to place your bets.

China's Play: Weaponizing Rare Earths

In April 2024, Beijing pulled a geopolitical ace: restricting exports of seven rare earth elements (like terbium and dysprosium) and magnets used in defense systems. The move wasn't just about trade—it was a direct shot at U.S. supply chains. Consider this: an F-35 fighter jet contains over 900 pounds of REEs, and China controls 99% of the global refining process for heavy REEs. Even as the U.S. scrambles to build domestic capacity, delays and technical hurdles mean we're still years away from self-sufficiency.

The stakes are existential. U.S. defense contractors like Lockheed Martin and Boeing are already scrambling to secure supplies. Meanwhile, Beijing is doubling down, expanding its restrictions to gallium, tungsten, and other critical minerals. This isn't just a trade war—it's a war for technological supremacy.

The U.S. Fightback: Mining, Manufacturing, and Innovation

The Department of Defense isn't sitting idle. Since 2020, it has poured over $439 million into projects to rebuild the mine-to-magnet supply chain. Here's where to focus:

1. MP Materials (MP): Operator of the Mountain Pass mine in California, the sole U.S. rare earth mine. In April 2025, MP halted all exports of raw concentrates to China, a bold move to force domestic refining. Its Mountain Pass facility is now ramping up production of NdPr oxide and aims to produce 1,000 tons of neodymium-iron-boron (NdFeB) magnets by 2025—though that's still just 0.7% of China's output.
   

2. Lynas Rare Earths (LYSD): An Australian company with a Malaysian refinery, Lynas is a critical non-Chinese source of light rare earths. It's now pushing into heavy REEs, with breakthroughs in dysprosium production. Analysts see it as a buy at current levels, with a 5-year growth target of 15%.

The Next Gold Rush: Alternatives to Rare Earths

China's chokehold has spurred innovation. Here are the materials and companies leading the charge:

1. Iron Nitride (α″-Fe₁₆N₂): A rare-earth-free magnet with 2x the energy density of neodymium. California-based Niron Magnetics is partnering with General Motors to develop this tech for EV drivetrains. A $5 million DOE grant is accelerating commercialization.

2. Recycling Tech: With 100 million EVs expected on roads by 2030, recycling their rare earth-laden batteries is a goldmine. Rare Earth Salts (funded by the DOD) and Europe's Okon Recycling are pioneers here. Toyota's investments in recycling infrastructure also signal big opportunities.

Investment Thesis: Short-Term Pain, Long-Term Gain

The path ahead is rocky. U.S. tariffs on Chinese goods now average 51.1%, and global supply chains face bottlenecks. But the pivot to alternatives and domestic production is inevitable. Here's how to play it:

• Buy MP Materials (MP): Despite its small scale, MP is the only game in town for U.S. rare earth mining.
• Hold Lynas (LYSD): Its diversification into heavy REEs and strategic partnerships make it a safer bet.
• Watch Niron Magnetics: If it can commercialize iron nitride by 2026, its valuation could skyrocket.

Avoid overexposure to pure-play Chinese stocks—they're political landmines. Instead, focus on recycling stocks and material science innovators.

The Bottom Line: This Isn't a Trade, It's a Transformation

China's rare earth dominance isn't permanent. The U.S. and allies are investing billions to rebuild supply chains, and breakthroughs in substitutes like iron nitride could upend the market. The next five years will see a tectonic shift—investors who bet early on the disruptors will profit.

In the words of an old trader: “The best time to buy is when everyone's panicking—and right now, the rare earth sector is screaming.”

Stay aggressive, stay diversified, and never let a crisis go to waste!