Rare Earth Realism: Why Decoupling From China Requires More Than Mining

In the global race for critical minerals, the United States has made rare earth elements a national priority. These metals—essential to everything from electric vehicles and wind turbines to precision-guided missiles and fighter jets—are the foundation of 21st-century industry and security. Yet, despite renewed attention and federal support for domestic mining, the U.S. remains strategically dependent on a single source: China.

The problem isn't a lack of raw material. It's that the U.S. can mine rare earths—but cannot efficiently refine them. Without a parallel investment in refining, separation, and downstream processing capacity, efforts to decouple from China will fall short. A credible rare earth strategy must extend beyond extraction. It must embrace the full value chain—starting with the most neglected and technically demanding step: turning mined ore into usable inputs.

The Strategic Stakes of Rare Earth Dependency

Rare earth elements (REEs) consist of 17 chemically similar metals used in high-performance magnets, batteries, displays, and defense systems. They’re indispensable to technologies like F-35 fighter aircraft, electric drivetrains, wind turbine generators, and satellite communications. As the global economy transitions to low-carbon energy and digitized defense platforms, demand for REEs is accelerating.

But supply remains highly concentrated. China processes an estimated 85%–90% of the world’s rare earths, effectively controlling the midstream bottleneck that converts raw material into functional compounds. This dominance grants Beijing enormous leverage—not just in trade negotiations, but in shaping the pace and direction of industrial development elsewhere.

What the U.S. Is Doing—and What It’s Not

In response, the U.S. government has taken visible steps to support domestic rare earth mining. The Pentagon has awarded contracts to expand extraction operations, including at California’s Mountain Pass mine—the only major rare earth mine currently operating in the U.S. Legislation like the Inflation Reduction Act and Bipartisan Infrastructure Law includes funding to explore domestic sources of critical minerals.

However, nearly all of these efforts focus on upstream supply. The midstream—refining, separation, and metallization—remains underdeveloped, underfunded, and underprioritized. As a result, U.S.-mined rare earths often end up exported to China for processing. The strategic contradiction is obvious: mining on American soil only to refine in China undermines the core objective of reducing reliance.

Why Refining Is the Hardest Part

Rare earth refining is not just a matter of scale—it’s a complex chemical process with steep financial, environmental, and regulatory barriers. Separating rare earth elements from one another and from surrounding ore involves intensive chemical treatments, large volumes of water, and the management of hazardous waste.

This makes refining both capital-intensive and politically sensitive. Projects must navigate stringent U.S. environmental permitting systems, local opposition, and uncertain timelines. Even when approved, they face high operating costs compared to Chinese refineries, which benefit from economies of scale, vertically integrated infrastructure, and comparatively looser environmental enforcement.

The result is a high-risk, low-margin segment of the supply chain that few U.S. firms are willing to touch without substantial government backing.

What True Decoupling Requires

1. Investment in Infrastructure
The U.S. needs a national commitment to build midstream capacity—refining plants, metallization facilities, and specialized laboratories. Public-private partnerships are essential to share risk, secure offtake agreements, and ensure long-term viability.

2. Policy and Regulatory Reform
Permitting reform is critical. While environmental safeguards must remain robust, the current system is too slow and fragmented to support urgent strategic goals. In parallel, tax incentives and federal procurement commitments can help reduce the economic uncertainty that has discouraged investment in refining.

3. Technology Development
There is a growing opportunity to develop cleaner, more efficient separation methods. Promising technologies—like selective membranes, ionic liquids, or electrochemical separation—could reduce environmental impact and improve economics. But these methods require sustained R&D support and commercialization pathways.

4. Workforce and Expertise
The chemical processing skills needed for rare earth refining are specialized and scarce in the U.S. Workforce development—through university programs, industrial apprenticeships, and targeted retraining—must be part of any long-term solution.

Allies Help, But Domestic Capacity Is Essential

Some U.S. policymakers point to international partnerships with countries like Australia, Canada, and Japan as a solution. These nations are trusted allies with their own rare earth resources and growing processing capabilities. Joint ventures and trade agreements can play a valuable role in diversifying global supply.

But overreliance on allies—even close ones—still leaves the U.S. vulnerable to external shocks and supply chain bottlenecks. If Australia ships ore to Malaysia or Japan for processing, the U.S. remains exposed to the same midstream fragility it is seeking to avoid. Domestic resilience must be the foundation—not the fallback.

The Cost of Inaction

If the U.S. fails to develop domestic refining capacity, it risks strategic paralysis in future crises. Any geopolitical confrontation with China—whether over Taiwan, trade disputes, or cyber conflict—could see Beijing curtail rare earth exports, as it has threatened and done in the past. Without the means to process its own material, the U.S. could face cascading supply disruptions across the automotive, energy, and defense sectors.

Moreover, the global market is shifting. As more nations race to secure their own mineral supply chains, competition for processing capacity will increase. Waiting too long may leave the U.S. permanently dependent on external refineries in an increasingly fragmented world.

Conclusion: A Strategy Grounded in Realism

The rhetoric around decoupling from China in critical minerals is growing louder—but rhetoric alone will not change the fundamentals. Mining is only the first chapter in the rare earth story. Without refining, the U.S. will continue exporting raw ore and importing vulnerability.

A realistic approach means investing in unglamorous, capital-heavy infrastructure. It means tackling permitting bottlenecks without compromising environmental values. And it means recognizing that full-spectrum supply chains—not just resource nationalism—are the key to long-term resilience.

For the U.S. to lead in the industries of the future, it must start by reclaiming control over the materials that power them. That starts not in the mine—but in the refinery.

Author: Ricardo Goulart