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Reducing the United States’ risks of dependency on China in the rare earth market

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  • Lee, Yurim
  • Dacass, Tennecia

Abstract

Rare earth elements (REE) are crucial in supporting multiple industries with new technologies. Thus the U.S.’ demand for rare earth oxide (REO) is on the rise. Yet, most of the REO supply comes from China, which exposes the U.S. to supply risks similar to that observed by the export quota imposed by China in 2010–2011. This paper uses supply and demand models to evaluate the effects of the U.S. government's proposed strategies to reduce supply risks associated with potential export restrictions from China. We show that there are multiple policies available to mitigate the impact of China's dominance in the market by attenuating the price increases and supply shortfalls, with the size of the changes depending on the price elasticity of demand and supply for REOs. In addition, there are varying degrees of welfare gains from each proposal. Specifically, reducing domestic demand for newly-extracted REEs through substitution (such as recycling or finding alternatives to REEs in production) provides the largest welfare gains. The next best welfare-improving proposal is discovering new domestic supplies of REOs, followed by plans to gain access to foreign REO sources.

Suggested Citation

  • Lee, Yurim & Dacass, Tennecia, 2022. "Reducing the United States’ risks of dependency on China in the rare earth market," Resources Policy, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:jrpoli:v:77:y:2022:i:c:s0301420722001507
    DOI: 10.1016/j.resourpol.2022.102702
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    References listed on IDEAS

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    Cited by:

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    2. Guo, Qing & You, Wenlan, 2023. "A comprehensive evaluation of the international competitiveness of strategic minerals in China, Australia, Russia and India: The case of rare earths," Resources Policy, Elsevier, vol. 85(PA).
    3. Kang, Youngho & Lee, Yurim & Oh, Hayoung, 2025. "Navigating geopolitical risks: The impact of the Senkaku/Diaoyu Islands dispute on global rare earth markets and diversification strategies," Resources Policy, Elsevier, vol. 106(C).
    4. Kai A. Konrad, 2026. "China’s rare earth policy: Prosperity maximization or great power geoeconomics?," Working Papers tax-mpg-rps-2026-06, Max Planck Institute for Tax Law and Public Finance.
    5. Gao, Wang & Zhang, Linlin & Zhang, Haizhen & Zhang, Hongwei, 2024. "The role of trade policy uncertainty on contemporaneous and lagged connectedness between critical raw materials and high-tech markets: Evidence from China," Resources Policy, Elsevier, vol. 98(C).
    6. Qing Guo & Jiayi Liu, 2025. "Study on the measurement of China’s rare earth products’ international market power and influencing factors," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-31, December.
    7. Zhang, Hongwei & Wei, Shiyao & Guo, Yaoqi & Gao, Wang, 2024. "Analyzing the interconnection between rare earth market and green economy: Time-varying effects of trade policy uncertainty," Resources Policy, Elsevier, vol. 97(C).
    8. Wang, Cong & Chen, Bo & Song, Yu & Wang, Xinyi, 2025. "Sino–US relations, climate policy uncertainty and rare earth prices," Energy, Elsevier, vol. 327(C).
    9. Anderson, Kelly Lynn & Halinski, Shannon & Hua, Khoi & Rupp, John A. & Graham, John D., 2025. "Hoping to mine: The nascent critical materials industry in the United States," Resources Policy, Elsevier, vol. 103(C).
    10. Zhang, Lei & Jiang, Peng & Zhang, Yibo & Fan, Yee Van & Geng, Yong, 2024. "Recycling impacts of renewable energy generation-related rare earth resources: A SWOT-based strategical analysis," Energy, Elsevier, vol. 312(C).
    11. Cheilas, Panagiotis & Christou, Tryfonas & Karkalakos, Sotiris & Kottaridi, Constantina & Michaelides, Panayotis G., 2025. "Rare earth elements and the US renewable economy: A causality exploration between critical materials and clean energy," Resources Policy, Elsevier, vol. 101(C).

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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