Rare Earths Explained: Why U.S.–China Supply Tensions Matter for Tech and Defense Stocks

Educational research only — not investment advice.

Rare earth stocks are attracting attention again as tensions between the United States and China expose a major weakness in global technology and defense supply chains.

Rare earth elements are used in everything from semiconductors and electric vehicles to radar systems, missiles and aircraft.

The problem is concentration.

China accounted for roughly 85% of global rare-earth refining in 2025, giving it enormous influence over how these materials reach global manufacturers.

That makes rare earths much more than a mining story.

They are increasingly a technology, defense and geopolitical supply-chain issue.

What Are Rare Earths?

Rare earths are a group of metallic elements with unusual magnetic, electrical and heat-resistant properties.

They are often used in very small quantities, but those small quantities can be essential.

Important examples include:

  • neodymium
  • dysprosium
  • terbium
  • yttrium
  • samarium

Many are used to manufacture powerful permanent magnets or specialized components.

That means a relatively small disruption in supply can affect a much larger finished product.

Why Does China Matter So Much?

The main issue is not simply where rare-earth minerals are mined.

Processing and refining are even more important.

China has spent decades building expertise and industrial capacity across the rare-earth supply chain.

Even after new U.S. and Malaysian investment, China’s share of global rare-earth refining only fell from more than 90% in 2023 to around 85% in 2025. The International Energy Agency estimates that China could still control roughly 70%–73% of refining in 2035 even if planned global projects are completed.

That means diversification will take years.

Why Are U.S.–China Tensions Important?

Rare earths have increasingly become part of trade negotiations.

Some Chinese suppliers have recently refused to ship rare-earth materials to U.S. companies because they fear becoming caught between American and Chinese restrictions.

Reuters reports that U.S. companies in aerospace, semiconductors and other sensitive industries are still struggling to obtain some materials.

Rare-earth access is expected to be discussed when U.S. President Donald Trump meets Chinese President Xi Jinping in Washington on September 24.

The market risk is straightforward:

export restrictions → lower supply → higher prices → production delays

Why Tech Companies Care

Rare earths and related critical minerals appear throughout the technology supply chain.

They can be found in:

  • advanced electronics
  • semiconductor equipment
  • data centers
  • electric motors
  • smartphones
  • renewable-energy systems

Yttrium, for example, is used in semiconductor and aerospace applications, while rare-earth magnets are essential in many high-performance motors.

A shortage does not necessarily stop production immediately.

But companies may need to:

  • pay higher prices
  • hold larger inventories
  • redesign products
  • qualify alternative suppliers

All of those responses can raise costs.

Why Defense Stocks Are Especially Exposed

Defense supply chains have even less room for substitution.

Heavy rare earths such as dysprosium and terbium are used in high-performance magnets needed for applications including fighter aircraft, missile guidance and radar systems.

That makes supply security strategically important.

Lockheed Martin has already been exploring purchases of critical minerals from U.S. mines as Washington pushes defense contractors to reduce dependence on Chinese supply.

For defense companies, the issue is not simply the price of the raw material.

It is whether enough material is available to maintain production schedules.

Why Rare Earth Stocks Can Benefit

Supply concerns can create opportunities for producers outside China.

If governments and manufacturers want alternative sources, they may support new:

  • mines
  • processing facilities
  • magnet plants
  • long-term supply agreements

The U.S. government has invested directly in companies including MP Materials, USA Rare Earth and other critical-mineral projects as part of efforts to build domestic supply.

This creates potential demand for companies positioned to supply non-Chinese materials.

But investors should be careful.

Rare-earth projects can take years to permit, finance and build.

Why Higher Prices Are Not Always Good

A supply shortage can push rare-earth prices higher.

That may help existing producers.

But very high prices can also encourage:

new supply + recycling + substitution + product redesign

The sector is therefore still cyclical.

A company may appear extremely valuable during a shortage, only for prices to weaken once new production arrives.

This is why investors need to distinguish between:

temporary scarcity

and

sustainable competitive advantage

Can the U.S. Reduce Its Dependence on China?

Yes, but not quickly.

The United States is expanding domestic mining and processing, financing new projects and building strategic inventories.

However, refining remains a major bottleneck.

The IEA expects global demand for critical minerals to at least double by 2040, which means new supply must grow while demand is also rising.

That makes diversification harder.

The challenge is not simply replacing today’s Chinese supply.

It is building enough new supply for tomorrow’s larger market.

What Could Ease the Risk?

Several developments could reduce pressure:

Improved U.S.–China trade relations
More predictable export licences could improve supply.

New Western refining capacity
Additional processing outside China would reduce concentration.

Recycling
Recovering rare earths from existing products could supplement mining.

Material substitution
Companies may redesign products to use fewer constrained elements.

But all of these solutions require time.

What Should Investors Watch?

The most useful signals are Chinese export controls, rare-earth prices, U.S.–China negotiations, new mining projects, refining capacity and defense procurement.

The central issue is simple:

Rare earths are inexpensive compared with many finished products, but without them those products may be impossible to manufacture.

That gives relatively small parts of the global commodity market enormous strategic importance.

For technology and defense companies, supply security may therefore matter just as much as the price of the material itself.

And for rare earth stocks, the key question is whether global diversification creates sustainable demand for new producers—or simply a temporary investment boom.

Analyze Macro Trends With TradingSimuLab

TradingSimuLab’s Macro tools help users study changing supply-chain risks, economic regimes and market trends rather than reacting to individual geopolitical headlines.

For more quantitative market research and educational trading tools, sign up to TradingSimuLab.

TradingSimuLab is for educational and research purposes only and does not provide investment advice.

Continue exploring TradingSimuLab.

  • Why a Strong U.S. Dollar Can Pressure Bitcoin, Gold and Tech Stocks

    A stronger U.S. dollar can create pressure across several major markets. Bitcoin can face tighter liquidity. Gold can become more expensive for overseas buyers. Large technology companies can see foreign earnings worth less when converted back into dollars. The simple chain is: Higher U.S. rates → stronger dollar → tighter financial conditions → more pressure…

  • Quantum Computing Stocks: Powerful New Trend or Another Hype Cycle?

    Quantum computing stocks are back in the spotlight. Rigetti, D-Wave and other quantum names recently jumped after the U.S. government announced new support for the sector. IonQ also unveiled its new Superion 256 platform and raised its 2026 revenue outlook. The excitement is real. But so is the risk. The key question is: Are quantum…

  • Japan Rate Hike Watch: Why the Yen Carry Trade Matters for Stocks and Crypto

    Japan could be about to tighten monetary policy again—and global markets are paying attention. The Bank of Japan is widely expected to raise its policy rate to 1.25% on September 18. At the same time, the yen has strengthened sharply against the U.S. dollar. Why does that matter outside Japan? Because the yen has long…

  • Food Inflation Shock: Why Rising Wheat, Corn and Soybean Prices Matter for Markets

    Food prices are becoming another inflation risk for markets. Wheat, corn and soybean prices have all risen sharply in 2026. That matters because these crops sit deep inside the global food system. Higher grain prices can eventually affect: The key question is: Could higher food prices make inflation harder to control? That is where TradingSimuLab’s…

  • Copper Near Record Highs: Growth Signal or New Inflation Warning?

    Copper is trading near record highs, making it one of the most important macro signals to watch right now. Prices recently moved above $14,700 per tonne. Copper is often called “Doctor Copper” because demand is closely linked to construction, manufacturing, power grids and economic activity. But today’s rally has another side. High copper prices can…

  • Gold Near $4,350: Why Safe-Haven Demand Can Rise Even When Interest Rates Are High

    Gold is holding near $4,350 an ounce even as U.S. Treasury yields remain close to 5%. At first, that can seem strange. Gold does not pay interest. Higher bond yields usually make interest-bearing assets more attractive. But gold is also a safe-haven asset. When geopolitical risk, inflation fears and market uncertainty rise, investors may still…

  • S&P 500 Volatility Squeeze: Is a Major Breakout Coming After Fed Week?

    The S&P 500 is unusually quiet—and that may not last. Volatility has compressed sharply after weeks of sideways trading. Reuters reports that Bollinger Bandwidth has fallen to its lowest level since June 2021. That type of compression can appear before a larger market move. Now the Federal Reserve meets on September 15–16. That gives the…

  • Anthropic at a $2 Trillion Valuation? What the AI IPO Boom Says About Market Risk

    Anthropic could become one of the largest IPOs ever attempted. The Claude AI developer is discussing a listing that could raise up to $100 billion and value the company at around $2 trillion. Nvidia is also reportedly considering becoming an anchor investor with an investment of up to $10 billion. The numbers are extraordinary. But…

  • Nvidia AI Watch: What the Anthropic Mega-IPO Could Mean for NVDA’s Trend

    Nvidia is back in the AI spotlight after reports that it may invest up to $10 billion in Anthropic’s potential mega-IPO. Anthropic is discussing an offering that could raise as much as $100 billion and value the AI company at around $2 trillion. Nvidia could become an anchor investor. The talks are not yet a…