Blame U.S. Regulations for China's Dominance in Rare-Earth Minerals

During a tempestuous moment in the ongoing trade war between the world’s two biggest economies, the Chinese government last October threatened to exercise its most potent economic leverage by ending exports of rare-earth minerals.

The bold move got results. The Trump administration, which had earlier threatened tariffs as high as 130 percent on Chinese goods, agreed to cut tariffs and ease tech export restrictions from the U.S. to China. In exchange, China said it would hold off on limiting rare-earth exports for at least a year.

The incident—and the ongoing threat embedded in its resolution—highlighted China’s strategic control over rare earths, the collective name for 17 different heavy metals essential to many aspects of modern computing technology. China mines 60 percent of the global supply of rare earths and processes 80 percent.

In an attempt to break China’s hold on the global market for this vital resource, the Trump administration is now spending millions to spur the development of new rare-earth processing facilities in Texas and California, and is also seeking partnerships with Australian mines.

That response flows from the widespread belief that Chinese dominance of rare-earth minerals is the result of a market failure.

“The market fundamentalists argue that government should not be picking which industries to support,” Marco Rubio, now the secretary of state, explained in a 2019 speech. “But what happens when an industry is critical to our national interest, yet the market determines it is more efficient for China to dominate it? The best example of this is rare-earth minerals.”

That view ignores the government’s own role in sabotaging America’s production of rare-earth metals—a market that the United States dominated until the 1980s.

Permitting is a major problem. It takes seven to 10 years for a new mine to obtain the necessary permits in the United States, compared to an average of two years in Canada and Australia, according to the Essential Minerals Association (EMA), an industry group. An S&P Global study published in 2024 found that it took American mines an average of 29 years to go from discovery to production—the
second-longest period in the world behind Zambia.

Those delays often stem from the fact that a single mine requires approval from multiple federal and state agencies with overlapping and duplicative regulatory requirements. The EMA estimates that permitting delays add more than $1 billion to the development of major mining projects.

As a result, much of America’s abundant supply of rare earths—which are actually not all that rare, despite the name—remains untapped. Round Top Mountain, in West Texas, contains the largest deposit of rare earths in the U.S., but a mine there has been in development since the 1980s and is now aiming to be open by 2028. Other projects in California and Utah are similarly tied up in permitting delays.

Breaking China’s hold on the rare-earth supply chain doesn’t require the federal government to pick winners and losers. Instead, it should just get out of the way.

The post Blame U.S. Regulations for China’s Dominance in Rare-Earth Minerals appeared first on Reason.com.