Beyond Rare Earths: Why the West’s Supply Chain Problem Is Bigger Than China — Takeaways
On December 11, the Association of Foreign Press Correspondents (AFPC-USA), hosted a podcast, in partnership with the Hinrich Foundation, titled “Lessons from How China Played Its Rare Earth Card.”
If Western countries try to use special interventions or workarounds to reduce China’s control over rare earth minerals, writes Senior Research Fellow Stewart Paterson, that alone won’t solve their broader reliance on other countries for important materials. Moreover, a key lesson from the Russia–Ukraine war was that many essential components for modern technologies come from industrial processes that Western nations no longer produce at large scale. So, to truly strengthen economic security, countries need a broader, coordinated global trade strategy that prioritizes cooperation with politically aligned partners, not just one-off fixes.
The podcast episode was hosted by Roseanne Gerin, a former editor at Radio Free Asia in Washington, who has worked in journalism for more than 25 years.
This podcast episode was produced in partnership with the Hinrich Foundation. AFPC-USA is solely responsible for the content of this episode. The transcript for the discussion can be found HERE.
Gerin opened the discussion by explaining why the report mattered now. She said it showed how China “built a rare earth and permanent magnet monopoly over decades,” and how recent export controls had finally forced a coordinated global response—from “new legislation in the U.S. and EU” to alliances like the Minerals Security Partnership. The sobering message, she stressed, was that even “with government backing, it will take at least a decade” for the U.S. and its allies to become self-sufficient, meaning “breaking China’s grip will require genuine cooperation.” She also emphasized that this challenge extended beyond rare earths, noting that other vital materials, such as neon gas, were tied to industrial processes no longer carried out at scale in advanced economies. The “clear lesson,” she said, was that true economic security required “a multilateral trading system grounded in geopolitical alignment.” Grin asked Paterson to start with the basics: what rare earths are, why they matter, and which industries rely on them.
Paterson responded by explaining that rare earths referred to a group of 17 elements that “ironically actually aren’t that rare,” but are “diffuse,” meaning commercially viable deposits were much harder to find. He said that “anything modern and useful” depended on them in some form, listing technologies from MRI machines and medical equipment to “the mobile phone in your pocket,” laptops, LED and LCD screens, as well as sophisticated military systems. Their use, he emphasized, was “very widespread indeed.”
When Gerin asked how China achieved such dominance and why countries like the U.S. ended up dependent, Paterson explained that China began with a natural advantage: “a surfeit of rare earth deposits.” But the real story, he said, was industrial strategy. Since the early 1990s, Chinese leadership had viewed rare earths as a strategic national asset—recalling Deng Xiaoping’s line that “the Middle East has oil and China has rare earths.” Through “industrial subsidy,” strong state direction and “low environmental standards,” Paterson said, China deliberately positioned itself as “the monopolistic provider” of these critical materials, creating the dependency the West faces today.
Gerin framed the stakes of Paterson’s analysis, saying the report showed how China had spent decades constructing a monopoly over rare earths and permanent magnets, and that even with “new legislation in the U.S. and EU” and new alliances like the Minerals Security Partnership, it would take at least a decade for the West to achieve self-sufficiency. She stressed that “breaking China’s grip” would require genuine cooperation, and she emphasized Paterson’s broader argument: this wasn’t just about rare earths. Other critical materials like neon gas were also tied to industrial processes abandoned in advanced economies, meaning true “economic security” depended on a trading system grounded in geopolitical alignment.
Stewart Paterson
When Gerin pressed him on risks, Paterson said the danger had always been obvious: with monopolistic control, Beijing had the ability to shut down production elsewhere and impose “very high economic costs,” effectively using rare earths to “bend” other countries to its will. He pointed to the 2010 incident involving Japan, where after a maritime collision China effectively imposed a rare earth embargo—whether officially acknowledged or not—and Japan ultimately backed down, which he described as a global “warning shot.”
However, Paterson noted that outside Japan, the world largely failed to respond meaningfully. Japan invested in recycling, overseas projects and R&D, but broader momentum faded, partly due to post-financial crisis economic turmoil. Policymakers, he argued, failed to internalize the lesson that dependencies “get worse” when ignored; as rare earth applications expanded, so did the cost of vulnerability. Fifteen years on, he said, the West was “not quite at square one,” but still starting from a “very low base.”
Gerin pressed the conversation forward by noting that since 2010, China had repeatedly demonstrated its willingness to “use export controls” on strategically important minerals—gallium, germanium, graphite, and now permanent magnets—and asked how such dominance functions as economic statecraft in a multipolar world.
Paterson argued that Beijing’s approach now explicitly mirrored the United States’ use of extraterritorial sanctions. China, he explained, would export rare earths “under license,” but insisted on retaining control even if those minerals were later embedded “in minute quantities” inside other products and re-exported. This allowed Beijing to differentiate between military and civilian end users and to ensure rare earths “end up where they think they are.” Just as significantly, he warned that by forcing companies to comply with these controls, China was also harvesting “huge amounts of very useful information about foreign supply chains.”
When Gerin asked how the U.S., EU, and allies were responding now, Paterson said there had finally been movement beyond rhetoric. He noted that governments had passed legislation and launched alliances focused on securing “supply chain consistency and resilience,” but crucially, only in the last year had “checks started to be written” and real state investment had begun. Washington, he said, was now taking equity stakes to build domestic supply chains “from mine to magnet,” although he questioned whether direct subsidies might be more efficient. He also emphasized that any solution had to be cross-border, describing multilateral cooperation as “the most cost efficient way—and definitely the fastest way—of achieving this goal.” The momentum was real, he said, but still “a bit fragmented” and slow.
Asked about groupings like the Minerals Security Partnership and the G7 Critical Minerals Production Alliance, Paterson stressed that these were no longer “mostly bureaucratic intent.” He said funding had already been announced and projects were moving beyond paper to reality, though production still had “a long way to go.”
Finally, Gerin raised his estimate that self-sufficiency in permanent magnets for the U.S. and close allies remained at least a decade away and asked why acceleration was so difficult. Paterson pointed to a combination of environmental permitting delays, “messy” and inherently polluting refining processes that societies had long been unwilling to accept, and the unique geological scarcity of heavy rare earths outside China. Demand itself was compounding the challenge, with markets growing roughly 7% a year and likely faster under the energy transition. He added that even determining true levels of dependence was difficult, since many rare earths entered Western economies already embedded in finished products. Financing had also been destabilized for years, he said, because China had repeatedly “suppressed prices” to drive competitors out before hiking them again—producing chronic volatility. While he noted that Western governments seemed to be finally confronting permitting and political trade-offs, he warned that demand remained “very heavy” and that building a comprehensive heavy rare earth supply chain was “still elusive.”
Paterson explained that China now “holds a trump card,” but one with a limited window of usefulness. He said Beijing was unlikely to repeat its old strategy of flooding the market to undercut competitors, because it rightly judged that “the West’s determination to break this monopoly” was now firm and that governments were willing to shoulder the financial burden. Instead, he argued, China was far more likely to pursue scarcity—keeping supply tight and “controlling who receives these” materials—to maximize leverage. He warned that such shortages could “close down pretty much the entire car manufacturing industry,” and that Beijing would tailor that leverage depending on the trading partner, extracting advantages on market access, energy security, or even intellectual property. “For now,” he said, China was “in the king’s chair.”
When Gerin asked what it would take for Western governments to build resilient and commercially viable supply chains rather than permanent subsidy-dependent ones, Paterson emphasized scale. He said subsidies should gradually fall as production expands, though new industries would need “protection from Chinese competition” early on. On environmental responsibility, he noted that Western producers had largely tried to operate responsibly before, but rare earth refining would never be pollution-free. The real solution, he said, lay in technology—especially recycling and new R&D—because China not only dominated production but also “monopolized” the cutting-edge technology and patents, and had now restricted export of that intellectual property. The West, he argued, faced the costly task of catching up, but if governments could “ensure a level playing field,” new industries could eventually “be profitable and not necessarily a burden on the taxpayer.”
Finally, stepping back, Paterson warned that rare earths were only one part of a broader problem. He said governments still did not fully grasp where all their strategic dependencies lay. Using neon gas as an example—crucial for semiconductor manufacturing but merely a byproduct of large-scale metal smelting—he argued that years of offshoring had blinded policymakers to how industrial ecosystems actually function. China, by contrast, adopted a “maximalist approach to manufacturing,” keeping even low-value production because it understood that breakthroughs in one sector reinforced others. The broader lesson, he said, was that Western countries must recognize manufacturing itself as national security. “When you do have a warning sign,” he cautioned, “you must act on it—and not leave it 15 years before taking the plunge.”
After walking through the long arc of China’s dominance and the West’s late response, Gerin turned to the geopolitical implications. She noted that in recent years China had expanded its use of export controls beyond rare earths to include gallium, germanium, graphite and now permanent magnets—materials with critical defense, renewable energy and advanced manufacturing applications. She asked how, in a “multipolar world,” such control became a lever of economic power.
Paterson argued that Beijing’s strategy had evolved. China had begun mirroring the “extraterritoriality” of U.S. sanctions policies, insisting on knowing not only where rare earths were exported but where even “minute quantities” eventually ended up if re-exported. This allowed China to differentiate between military and civilian end users while also “harvesting huge amounts of very useful information” on global supply chains, giving Beijing both leverage and intelligence.
Gerin then asked how the U.S., EU and allies were now responding. Paterson said governments had finally moved beyond rhetoric to real spending. The U.S., he said, had begun taking equity stakes in new domestic supply projects and promoting a “from mine to magnet” approach. Still, he cautioned that efforts were fragmented, slow, and dependent on cross-border collaboration, emphasizing that viable supply chains “will have to span continents.” New groupings such as the Minerals Security Partnership and the G7 Critical Minerals Production Alliance were no longer just bureaucratic talk, Paterson said; they were now funding “real projects on the ground,” even if self-sufficiency remained at least a decade away.
Pressed on why the timeline remained so long, Paterson cited environmental permitting, difficulty sourcing heavy rare earths outside China, surging demand from the energy transition, poor visibility into just how many rare earths were embedded in imported finished products, and chronic price suppression tactics by China designed to bankrupt rival producers. Western governments, he said, had finally begun accepting that self-sufficiency carried environmental tradeoffs—but even so, “a comprehensive heavy rare earth supply chain is still elusive.”
Gerin then asked how China was likely to respond to the diversification push. Paterson said Beijing understood its monopoly card had a “limited lifespan.” While historically China had flooded markets to destroy competitors, he believed this time Beijing was more likely to maintain scarcity to preserve leverage—because it now recognized that Western determination to diversify was “complete.” Scarcity, he warned, gave China the ability to cripple industries such as global auto manufacturing and extract concessions ranging from improved market access to energy security advantages and even intellectual property exchanges.
For Western efforts to avoid permanent state dependency, Paterson said the key was scale and eventually shielding emerging industries from predatory Chinese pricing until they could compete. He emphasized that environmental responsibility would depend heavily on technological progress, especially recycling, but acknowledged the West was twenty years behind because China controlled the leading-edge processes and had placed export controls on related IP.
Stepping back, Paterson argued that the broader lesson extended beyond rare earths. Governments, he said, did not always see the next dependency coming. China’s “maximalist approach to manufacturing” created holistic industrial ecosystems where innovations in one sector reinforced others. He cited neon gas—a byproduct of heavy industrial processes—as essential to semiconductors, illustrating how countries that outsourced foundational manufacturing had unknowingly weakened national security. “Treating manufacturing as a key component of national security,” he said, was one of the central takeaways.
Finally, Gerin asked why the U.S. or EU could not simply “go it alone.” Paterson said the U.S. lacked the time and the full resources to rebuild its industrial base independently—it would take 15–20 years—and even then it would still rely on imports of key inputs like copper and heavy rare earth ores. The EU, meanwhile, lacked the capacity and remained energy-dependent and economically pressured by a “second China shock.” A plurilateral strategy, he argued, would be faster, cheaper and more efficient, resembling something closer to the pre-China WTO system or new alliances of “like-minded nations.” Together, countries like the U.S., Japan, Germany and South Korea already held “near-dominant positions” in future technologies—far stronger, he implied, than the U.S. acting alone.
Turning to the latest developments, Gerin referenced the recent Trump–Xi meeting in South Korea, noting that China delayed expanded rare earth export controls planned for October but preserved its April licensing regime, which disproportionately affected Western military users. Paterson said this allowed Beijing to appear conciliatory—supplying civilian needs “provided they know where the products are ending up”—while simultaneously demonstrating “the complete degree of control” it maintained over Western supply chains and collecting commercially valuable data from companies forced to disclose end-use details. After the meeting, a spike in November Chinese rare earth exports led some to wonder whether Beijing was again trying to undermine non-Chinese projects, but Paterson dismissed that, saying it likely reflected restocking after severe disruption, not a deliberate repeat of 2010.
He concluded starkly that, for now, China still had the “whip hand” and would for years to come, meaning the West would have to learn to live with that reality—even as it rushed to change it.
Paterson then said China’s proposed rule mirroring the U.S. Foreign Direct Product Rule would have created “a lot” of compliance burdens because allied manufacturers would suddenly need deep, traceable supply-chain data for even small amounts of Chinese rare earth content. He framed it as Beijing “demonstrating the power of economic statecraft” and underscored that Western governments had known about China’s dominance for 15 years but failed to act sooner.
Gerin asked if China had also moved beyond controlling raw minerals and began targeting the “picks and shovels” of the industry—technology, equipment and production systems for refining and magnet manufacturing—to slow Western catch-up. Paterson compared it to historic and modern examples of nations protecting industrial advantages, noted that China appeared ready to imitate U.S. extraterritorial controls, and suggested Beijing might succeed longer than the West did at guarding intellectual property. Still, he insisted that “necessity is the mother of invention” and argued Western innovation—especially in recycling—would eventually deliver self-sufficiency, even if progress would be “slower and more expensive.”
Paterson said China had clearly broadened its strategy to other critical sectors—like artificial graphite and high-purity silicon—signaling an era of “weaponized” trade dependencies in which Beijing now held at least an “oligopolistic, if not monopolistic” grip over essential technologies tied to national security and the energy transition. China, he said, was deliberately flexing that leverage, but in doing so was also provoking aggressive policy responses; he argued the United States was currently moving faster than Europe in building alternatives.
On the U.S. response, Paterson said Washington’s agreement with Australia—and the broader effort to build like-minded supply chains with partners such as Canada—did meaningfully “change the picture.” He cautioned that overlapping alliances could blur strategy but said coordination among trusted partners like Australia’s Lynas demonstrated credible progress toward reducing dependence on China.
Gerin noted that China’s one-year pause on expanded rare earth export controls created only a brief “window of relative stability” and asked what the U.S. should prioritize—stockpiles, allocation rules, or targeted project support. Paterson said the answer was essentially “all of the above,” stressing that stockpiling shouldn’t just be a government responsibility. He argued companies must move away from “just-in-time” habits toward a “just-in-case” inventory approach for critical minerals vulnerable to geopolitical shocks. But he warned against trusting the pause too much, saying China could “go slow on the licensing” and the move was “not in any way a strong commitment,” meaning the fundamental risk barely changed.
Later, Gerin asked how journalists should cover China’s rare earth policy without misunderstanding it. Paterson said the biggest media pitfall was confusing raw ore with processed materials and magnets, noting that China’s dominance came from controlling “the intermediate processes,” not from simply having reserves. He also warned reporters not to equate licensing with an embargo, since Beijing still retained the power to “control supply” and a past license offered no guarantee of receiving another—so the one-year rollback did not mean the problem vanished, even temporarily.
Gerin asked how journalists could realistically measure whether diversification beyond China was actually happening, for example by tracking the G7’s highlighted projects. Paterson said reporters should bypass political announcements and “go straight to the companies,” citing MP Materials and Lynas as reliable barometers because publicly listed firms regularly disclose progress and market assessments.
Gerin then asked how journalists could tell more engaging stories about hidden dependencies like neon gas. Paterson said this remained difficult but argued that modern life depends on “enormous numbers of obscure inputs,” and journalism could perform a public service by revealing how precarious those supply chains really were.
Finally, when Gerin asked where reporters should turn for credible data on rare earth diversification—especially heavy rare earths outside China—Paterson pointed to CSIS, Rare Earths Exchanges, and government research across the U.S. and Europe. He added that while it came “10 or 15 years too late,” governments were now producing a wealth of useful material.
