The Daily - China's Upper Hand: Rare Earth Metals

Episode Date: June 10, 2025

In the trade war between the United States and China, the biggest sticking point is a handful of metals that are essential to the U.S. and almost entirely under the control of China.The problem is, China has now cut off America’s access to those metals, threatening American industry and the U.S. military. Keith Bradsher explains how the United States became so dependent on China for these metals in the first place, and just how hard it will be to live without them.Guest: Keith Bradsher, the Beijing bureau chief for The New York Times.Background reading: China produces the entire world’s supply of samarium, a rare earth metal that the United States and its allies need to rebuild inventories of fighter jets, missiles and other hardware.What to know about China’s halt of rare earth exports.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. Photo: Bert van Dijk/Getty Images Unlock full access to New York Times podcasts and explore everything from politics to pop culture. Subscribe today at nytimes.com/podcasts or on Apple Podcasts and Spotify.

From the New York Times, this is The Daily. I'm Natalie Ketroff. In the ongoing trade war between the U.S. and China, the biggest sticking point is a handful of metals that are extremely rare, essential to the U.S., and almost entirely under the control of China. The problem is, China has now cut off America's access to those medals, threatening U.S. industry and its military. Today, my colleague Keith Bradshaw explains how the U.S. became so dependent on China

for these medals in the first place, and just how hard it'll be to live without them. It's Tuesday, June 10th. Keith, it is lovely to see you again. It's great to be back. Thank you. So it's Monday evening. Delegations for the US and China met in London today to try to hash out a deal to de-escalate this trade war.

There's going to be another set of meetings on Tuesday. And at the heart of these negotiations, we know, are these rare earth metals. China essentially banned shipments of them to the US in early April, and that's caused a lot of problems. You Keith have been covering this industry from inside of China for many, many years, which I mean, respect. But if you would ask me a year ago whether we'd be doing an entire daily episode on this, I might not have believed you.

So tell me about this Rare Earths business. Well, first, just as an overview, the rarest industry has it all. It's got murderers, gangsters, acid pits, dirt bikes, American defense contractors, electric cars, clean energy, possibly mass layoffs in the US economy. You name it, this industry's got it. Wow. You had me at dirt bikes, Keith. The dirt bikes we're going to get to.

First, what are these rare earths? These are elements near the bottom of the periodic table that everybody saw on their classroom walls, even if they didn't pay attention to them. And some of these rare earths really aren't that rare. You've got lanthanum, which is used at oil refineries to separate the oil into the gasoline and the diesel and the jet fuel and so forth. You've got cerium, which is used for polishing glass for your camera lenses. But there are seven rare earth elements that are considerably less common.

China completely dominates the world supply of them. It mines most of them and processes almost 100 supply of them. It mines most of them and processes almost a hundred percent of them. Those seven are dysprosium, gadolinium, lutetium, samarium, scandium, terbium, and yttrium. Okay, some of us may have never heard of scandium before, but it sounds like these are both very rare and very important. What do they go into? Give me a sense here of why we should care about these things. These elements are used in many products that have changed our lives.

They're in aircraft parts. They're in aircraft parts. They're in lasers. They are in the contrast agent that's used when you go to the hospital for medical imaging. And the most important and fastest growing uses are for very powerful magnets. You can make a rare earth magnet that is 15 times as strong as an old-fashioned steel magnet. Take a car, for example. If you went back quite a few years, you had to move the car seat back and forth manually. These days, a single luxury car seat may have 12 separate motors to do all kinds of little adjustments to that seat. Your thigh adjustment, your lower back adjustment, the tilt of the back of the seat, all these things these days have little electric motors and each of those has a rare earth magnet. And it's not just limited to cars. For example, the seventh

of these rare earth elements, samarium, has lots of military applications because it can stay strongly magnetic even at temperatures that will melt lead. And as a result, Samarium magnets, you find 50 pounds of them in an F-35 stealth jet. You find them in missiles. You find them in drones. You find them in smart bombs Really these rare earths now are in critical both to the economy and to national security Okay, so I want to understand Keith how we got to a situation where China has

Near total control over the supply of these metals and magnets that are so important, we're at their whim. How did this happen? What's particularly striking is that it was the United States, and a little bit Japan, that invented these amazing magnet technologies using rare earths. They really came out of General Motors research in the 1980s. And in the 1990s, the US was making these magnets in Indiana, and it was mining much of the world's rare earths for those magnets right in the United States at Mountain Pass, California, which is close to the California-Nevada border.

It's out in the desert. I've been there. Beautiful place. Anyway, that mine in Mountain Pass was the world's largest and even main mine for producing rare earths for decades. In fact, the europium, a different rare earth element, from that mine put the color red in the early color televisions. Wow. But in 1998, that mine was forced to close.

It stopped production. Why did it stop production? It turned out that it had a pipeline that leaked traces of heavy metals and a faint radioactive residue in a desert area, including where there were a few rare tortoises. The cost of the cleanup and of improving the environmental compliance was more than the owners of the mine could afford, so the mine shut down. And meanwhile, China had been ramping up its own rare earth production through the 1980s, through the 1990s, doing it very cheaply without a lot of environmental compliance at all.

And many big businesses were welcoming China's decision to join the World Trade Organization in 2001. And so the feeling was that this was the beginning of a closer economic integration with China. Right. This is the heyday of free trade orthodoxy. I mean, this is the moment for optimism around this. And I'd imagine that the U S closing its only mine for rare earths, seeding the field to China makes for a pretty big business opportunity over there for businesses

that want to get into this. That's exactly right. So a lot of people saw a chance to make money and set up their own mines and processing facilities, both legal businesses and also organized crime. Tell me about that, Keith. Why organized crime? These rare earths are not that hard to mine, doesn't take lots of big sophisticated equipment. And they were being mined in the case of the best ore deposits of all, in

a poor province in South Central China with a reputation for corruption. Let me tell you how they mine them. You get a guy with a dirt bike. This is where the dirt bikes come in. That's exactly right. You get a guy with a dirt bike and he drives up the side of a pine covered red clay hill, digs a small hole in the dirt, dumps in a sack of cream colored powder. It's ammonium sulfate in less concentrated versions. It's actually a fertilizer. And then he dumps a bunch of water in it and as it percolates down through the inside of the hill, it dissolves a lot of the

rare earths with it. And it begins coming out the bottom of the hill just because water eventually comes out somewhere. It's just like making coffee. Yes, wow! I've never heard that explanation before. That is exactly what it's doing. The hill is like coffee grounds. The coffee is coming out the bottom of the hill into a pit. You dig in the clay and you dump in a lot of oxalic acid into the slurry and that causes the rare earth to settle out as faintly pink crystals on the bottom of the clay pit. So then you dump out all the remaining acid and other liquid and contaminants into the creek, let the faintly pink crystals dry. Then from there, after the different rare earths are separated from each other, they're

taken to the magnet factories in Gangeo and turned into these extraordinarily powerful magnets. But the first stages of that process easily lend themselves to criminal activity. Because it's straightforward to do this, is what you're saying. It's very straightforward. It's called bucket chemistry. It doesn't take a lot of resources to do it. All it really takes is a corrupt local politician willing to look the other way as you start digging holes in public lands and dumping chemicals in them

and pumping out what comes out of the bottom of the hillside. I have to say, it really reminds me of when I saw fentanyl being made when I was reporting in Mexico. Just as an aside, there's something similar about the bucket chemistry of it all. It's a good comparison because some of these rare earths sell for hundreds of dollars per kilogram.

So it's also lucrative. Yes, there's a lot of money in it. When I first started covering this industry in 2009, the buyers used to be taken in the trunks of cars so that they wouldn't know where they were going to a secret warehouse in Guangzhou. And then they'd climb out of the trunk and they'd be shown the various merchandise. So this was a very dubious industry. A wild west, it sounds like. My question is, were American companies getting their medals

from these kind of rogue producers? What's remarkable is that companies like Boeing, Lockheed Martin, General Motors, Toyota, Volkswagen, everybody depended on these very dubious rare earth value chains, but nobody was clear on where their rare earths were coming from. How much was from legal minds, how much was from illegal minds. At the same time, demand for these rare earths was exploding as companies found more and more uses for them. So by 2004, China had acquired an almost complete grip on the entire supply chain for rare earths and rare earth magnets.

But then in 2010, China shocked the world. Our top story, several tiny uninhabited islands in the East China Sea are at the heart of an escalating dispute between China and Japan. China and Japan were arguing over who owned a small group of uninhabited islands north of Taiwan. Beijing's countermeasures took aim at the heart of the Japanese economy. And China suddenly imposed a total embargo on any shipments of rare earths to Japan, which at the time really played the central role in making the magnets and many other technologies. Industry Minister Ohada said it's clear Japan is ill-prepared to lose its supply of rare earth metals.

And these factories were producing a lot of the basic industrial materials that in turn then went to the United States, Europe, South Korea and elsewhere. Frankly this story is about the rare earth exports being held up. It's a kind of leverage that I thought went out with the Cold War 20 years ago. And the embargo lasted for two months. But this incident, which really shook Japan and to some extent the US resulted in both countries taking actions on rare earths although what Japan did would prove much more effective than the American response. We'll be right back.

Let's talk about Japan's response. What does Japan do after this embargo? For Japan, the embargo was so traumatic that the government and the companies said never again. The companies began pouring money into building stockpiles of these rare earths. And the government, in cooperation with one of the big trading companies of Japan, began providing the financing for a big mine to be dug in Australia, and for mineral processing then to be done in Malaysia.

So those moves reduced considerably Japan's dependence on China. Interesting, so Japan decided to try to become self-sufficient because of all of this. What did the U.S. do? In the United States, there was a lot of talk about taking action about ending American dependence on Chinese rare earths. The bottom line is this. China is cornering the market on rare earth materials and we, the United States, are falling behind. Some members of Congress were expressing a lot of concern

about it in late 2010. The fact is that they're called rare earth for a reason. They are rare. Hillary Clinton, who was Secretary of State then, expressed strong concern. The world as a whole needs to find new sources which we will be pursuing and investors started to see rare earths as an attractive possibility This is Mountain Pass mine, it's over 50 years old

currently getting ready to go back into operation At the Mountain Pass mine in California, a billion dollars were spent on very elaborate environmental precautions. There were points in our history that we are not proud of environmentally. We have learned from those issues and we have redesigned our processes to make sure... That mine finally reopened in 2014, but something else was happening at the same time. The bottom falling out in rare earth equities. China released a flood of additional rare earths into world markets, and that flood of rare earths pushed the prices way down.

It wasn't possible for the Mountain Pass mine to earn enough money selling rare earths at these low prices to pay back its debts. And so the mine ended up closing again the next year in 2015 and went bankrupt. But was that not an issue in Japan, this influx of cheap metals from China? It was an issue and the Japanese companies were willing to pay a little more to get production that they knew wouldn't be interrupted from Australia. And the Japanese corporate and government alliance was willing to keep lending money to make

sure that the Australians didn't go out of business. Basically what we're talking about here is industrial policy, right? Japan showed a willingness to prop up an industry that may not be profitable, but is seen as critical to national interests. That's exactly right. The United States tried to do the same, but after a few years, as sometimes happens, people began to lose interest. There wasn't the same enthusiasm for maintaining a separate supply chain from China.

So the US sort of lost track of this issue. And then when China suddenly halted supplies in April 4th, that failure to keep track of it came back to haunt the United States. Right. Here we are today facing another situation in which China is restricting the export of rare earths, putting the US and a lot of countries in a really difficult position. So, what does the US do now? What are the steps the administration has taken?

We've seen considerable pressure by the United States on China to allow an immediate resumption of rare earth exports. The American and European car makers need these rare earths and China has begun allowing some of them out as the US has put on the pressure. Now what kind of pressure are we talking about? The US has stopped selling jet engines to the commercial aircraft that China is starting to build in competition with Boeing. The United States has also halted the delivery of some computer chip design equipment to China. And the US briefly said that it would stop issuing

many visas to Chinese students to put pressure on China to get more of these rare earths. I had no idea that the potential limitations on Chinese students coming to the US were part of this negotiation? Almost entirely, actually. Keith, what do you think of this pressure campaign? How likely is it to succeed?

Well, it has been a way to show China that the U.S. is very serious about the rarest issue and that the U.S. also has cards to play, that the two countries need each other in many ways. And so the US effort has helped lead to the talks now underway in London. The real question is, what kind of an agreement can be reached going forward? So for that, it's likely we're going to see China resuming commercial supplies of rare earths to the West. The difficulty, however, is that China may not allow enough rare earths to be exported for people to build stockpiles

so that they know the next time China cuts off supplies, they won't run out immediately. So we'll likely see continued limits on the volumes, even for commercial. And then for national security uses, for military uses, it may be extremely difficult to persuade China to resume shipments of Samarium, which are needed for all of these fighter jets, missiles, and so forth, and are needed not just by the United States, but for weapons deliveries to places like Ukraine or Israel or Taiwan. SONIA DARA So this doesn't just make the U.S. vulnerable. It actually has these ripple effects where there's all these other countries that rely on the U.S. for weapons that may also be squeezed

because of this. Absolutely. And it sounds like even in the best case scenario for the US where the pressure campaign works and China starts letting these metals back in, even in that scenario, the US has not addressed the longer term issue here. Like, that wouldn't do anything to wean the US off of China for these rare earths. That's right. A long term solution requires first of all, producing these kinds of rare earths in the United States, producing the magnets that come from these kinds of rare earths

in the United States. And then making sure that new production doesn't just close down again in a couple of years, as happened the last time around. So how do you keep that production going? Well, first of all, American companies need to be willing to sign very long-term contracts for magnets and so forth from suppliers that are not in China, even if that means agreeing in the long term to pay a somewhat higher price. Which seems difficult. Yes.

But there's another way you can force them to buy American magnets, and that would be to put lasting high tariffs on imports of rare earths and rare earth magnets from China to discourage customers in the United States from choosing Chinese suppliers and to encourage them to buy American products instead. So just stepping back here, it seems like one way you could look at this is that Trump kind of did the worst thing possible for the American manufacturers that he says he's trying to help, which is that he essentially provoked China to hit them right at their Achilles heel where they're

most vulnerable, which is their reliance on China for these extremely rare and important medals. alliance on China for these extremely rare and important metals? That's one of the two theories is that the administration has triggered a crisis for American manufacturing. And to take it farther, that some American manufacturers might conclude that it's safer to start making their entire brake motors or steering motors or other systems in China just to make sure that those motors can get enough magnets.

In fact, that's what happened after the 2010 crisis. A lot of companies did move, for example, magnet manufacturing into China because they said, well, boy, if I can't get the rare earths out of China, then I better be making my magnets in China because in the 2010 crisis, China did not restrict the export of magnets. It just restricted the raw materials. Now it's taking the second step, restricting rare earths and magnets. So then some companies are beginning to say, well, maybe we need to make the whole motors in China.

That's one theory. The other theory, however, is that China might have bungled this in a different way, which is that American companies and for that matter, European companies and Japanese companies might say, we can no longer really trust China with a big role in our supply chains. And we need to move a lot of production out of China. It is possible that what we'll see is companies, for example, automakers might say, why are we buying all of our starters and so many of our fuel injection systems and so forth from China if on any day because of a geopolitical dispute, they might cut us off and shut down

all our factories. And so you might see American companies and Japanese companies and European companies say, okay, that's the last straw and we're going to move our purchasing contracts to Mexico and Vietnam and India and places like that. Yeah, it's funny. Another way you could see this is that the episode itself highlights just how dependent we are on Chinese imports and how vulnerable that makes us. And that is sort of a central tenet of Trump's theory of the US relationship with China.

The question is, again, can you go the Japan route in the United States? Can you really design some policies here that prioritize self-sufficiency, national security over the profitability of a potential mine, which seems like is difficult in the context where China dominates. It's difficult in the United States because the history has been a reluctance to lend a lot of government money to a specific project like this mine and then also because there's been lend a lot of government money to a specific project like this mine, and then also because there's been quite a bit of hostility to tariffs. Right.

Industrial policy is not something that America has done particularly well. No, and this is proving it all over again. In fact, you could make a case there are few worse examples of misplaced industrial policy than how America has handled its rare earths dependence. Keith, thanks for coming on the show. Really good to talk to you, Natalie. Always my pleasure. We'll be right back. Here's what else you need to know today. Protests over deportation roundups continued for a fourth day in Los Angeles and spread

to other cities as tensions rose over the Trump administration's aggressive response to the demonstrations. On Monday, the Pentagon ordered an extra 2,000 National Guard troops to be sent to LA, doubled the number already on the ground, and also mobilized a battalion of 700 Marines to the city. Meanwhile, the feud between President Trump and California Governor Gavin Newsom intensified. California sued the Trump administration to stop the deployment of National Guard troops, arguing that it

violated the Constitution. Newsom told the Times the deployment was, quote, a provocation and said many of the 2,000 soldiers already dispatched to the city were not being put to work. And after the president's border czar, Tom Homan, suggested the administration was prepared to arrest Newsom if he interfered with immigration enforcement, Newsom hit back. Come after me, arrest me. Let's just get Secretary Robert F. Kennedy Jr. fired all 17 members of a committee that advises the Centers for Disease Control and Prevention on immunization. The panel wields enormous influence, and its recommendations determine vaccine coverage for insurance companies and government programs like Medicaid.

Kennedy's decision directly contradicts a promise he made during his confirmation hearings, when he said he would not alter the committee. Today's episode was produced by Mary Wilson, Alex Stern, and Stella Tan. It was edited by Lisa Chow and Chris Haxel, contains original music by Diane Wong and Dan Powell, and was engineered by Chris Wood.

Our theme music is by Jim Brunberg and Ben Landsberg of Wonderly. That's it for the daily. I'm Natalie Ketroff. See you tomorrow.