Rare Earths: The New Frontline in US-China Trade Wars—Investment Opportunities in a Resource War

The escalating US-China trade dispute over rare earth minerals has transformed these obscure elements into geopolitical weapons. With China controlling 70% of global rare earth production—critical for everything from electric vehicles to military tech—the stakes have never been higher. As negotiations in London this week revealed, both sides are leveraging rare earths as leverage in a high-stakes game. For investors, this isn't just about tariffs and trade deals: it's a once-in-a-generation opportunity to capitalize on a resource war.

The Rare Earth Rivalry: Why This Matters

Rare earths are 17 elements with unique magnetic and conductive properties, indispensable for modern technology. China's dominance stems not just from mining but from its near-monopoly on refining these minerals into usable products. The April 2025 export restrictions Beijing imposed—retaliation against U.S. tariffs—have exposed vulnerabilities in global supply chains. Automakers like General Motors and Ford faced immediate shortages, while defense contractors scrambled to secure critical components.

The June talks in London highlighted the urgency: the U.S. demands China lift export controls entirely, while Beijing seeks reciprocal concessions on U.S. semiconductor and AI chip restrictions. With a 90-day tariff truce in place but tariffs still hovering at 30% (U.S.) and 10% (China), the impasse persists.

Data-Driven Insights: The Economic Reality

The trade war's toll is clear in the numbers:

Yet rare earths remain a bright spot. Despite temporary export licenses for automakers, prices for critical elements like neodymium (used in magnets) and dysprosium (for heat-resistant alloys) have surged.

Investment Opportunities: Where to Stake Your Bets

1. Rare Earth Miners & Processors:
   Companies with secure access to deposits outside China are poised to profit.
2. MP Materials (MP): The U.S.'s only rare earth producer, with a California mine and plans to expand refining capacity.
3. Lynas Corporation (LYD): Australia's dominant rare earth processor, supplying Toyota and others.
4. Northern Minerals (NTU): Australia's high-purity dysprosium producer.

1. Technological Innovators:
   Companies developing alternatives to rare earth-dependent tech could thrive.
2. NIO (NIO): Chinese EV maker investing in rare-earth-free motors.

3. Recycling firms: Companies like American Manganese (AMY) that recover rare earths from scrap.

4. Geopolitical Plays:
   The U.S. push to diversify supply chains—e.g., deals with Ukraine for mining rights—creates opportunities in frontier markets.

Risks & Considerations

• Geopolitical Volatility: A sudden trade deal could ease tensions and depress rare earth prices.
• Oversupply Risks: New mines coming online post-2025 may flood markets if demand slows.
• Regulatory Hurdles: Environmental concerns around rare earth mining could delay projects.

The Bottom Line: Position for the Long Game

Rare earths aren't a short-term trade; they're foundational to 21st-century industries. Investors should allocate 5-10% of a diversified portfolio to this sector, prioritizing companies with:
- Secure supply chains,
- Diversified customer bases, and
- R&D in recycling or substitution technologies.

The US-China standoff ensures rare earths will remain a strategic battleground. Those who invest in resilience—and not just in conflict—will profit as the world races to secure these critical resources.

Investment advice disclaimer: Past performance does not guarantee future results. Consult a financial advisor before making decisions.