The Unseen War: Rare Earths, AI, and the Geopolitical Scramble for Critical Minerals

• December 3, 2025
• Author - Team XALT

The world is seemingly at peace, at least on paper, when it comes to the critical rare earths trade between the US and China. A one-year truce, brokered late last year, saw Beijing temporarily ease some of its most recent, expanded export controls on these indispensable elements. Yet, beneath this veneer of calm, a silent, high-stakes battle rages – a geopolitical contest for control over the very building blocks of our high-tech future. This isn’t just about trade; it’s about technological supremacy, national security, and the delicate balance of global power.

Why It Matters: The Invisible Backbone of Modernity

From the screens of our iPhones to the magnets powering electric vehicles, the guidance systems of advanced missiles, and even life-saving MRI machines and cancer treatments, rare earth elements (REEs) are the unsung heroes of the modern age. Names like gadolinium and dysprosium might sound obscure, but their unique magnetic and optical properties make them irreplaceable. As Bloomberg Television reported, “rare earths are among the most critical raw materials on the planet, deeply embedded in the technologies that underpin modern life”. The ability to access and process these 17 metallic elements is, quite simply, non-negotiable for any nation aspiring to lead in the 21st century.

China’s Unyielding Grip: A Strategic Chokepoint

Despite the temporary easing of some controls, China’s formidable dominance over the rare earths supply chain remains largely unshaken. Beijing has strategically cultivated this position over decades, and it now wields it with considerable geopolitical prowess. According to the International Energy Agency, China controls a staggering “more than 90% of global rare earths and permanent magnets refining capacity”. Furthermore, it accounts for approximately 70% of global REE mining and 85-90% of global refining and separation.

This market stranglehold allows China to maintain tight controls on supplies, notably prohibiting sales to companies that produce weapons. Even the “truce” didn’t dismantle China’s existing rare earth licensing system, which came into effect in April 2025. This system still requires case-by-case permission for certain elements and permanent magnets, effectively choking off Western military manufacturers. As the Center for Strategic and International Studies (CSIS) highlighted, these measures are China’s “most consequential measures to date targeting the defense sector,” aiming to prevent “direct or indirect contributions of Chinese-origin rare earths or related technologies to foreign defense supply chains”. The result? A fiercer competition for the limited stockpiles available outside China, leaving European defense companies, for instance, in a precarious position as US rivals snap up available supplies.

America’s Alliance Offensive: Building a China-Free Future

Recognizing the acute vulnerabilities, the United States is not standing idly by. The White House is slated to host a crucial meeting on December 12, 2025, with eight allied nations: Japan, South Korea, Singapore, the Netherlands, the United Kingdom, Israel, the United Arab Emirates, and Australia. This gathering aims to fortify supply chains for the computer chips and critical minerals, including rare earths, that are essential for the burgeoning field of AI technology. Jacob Helberg, the US Under Secretary of State for Economic Affairs, framed this as an “America-centric” strategy in a “two-horse race” against China, seeking to “limit dependence on China” and avoid “coercive dependencies”. This initiative, as reported by Bloomberg, is a strategic evolution, focusing on “producer countries” and spanning the “full technology stack supporting AI systems”.

China’s Counter-Narrative: A “Green Minerals” Coalition

Not to be outmaneuvered, China is also actively rallying support for its own position, albeit with a different narrative. At last month’s Group of 20 (G20) summit in Johannesburg, South Africa, Chinese Premier Li Qiang unveiled details of a “Green Minerals Global Economic and Trade Cooperation Initiative”. This initiative involves 19 developing nations, including resource-rich Cambodia, Nigeria, Myanmar, and Zimbabwe, alongside the UN Industrial Development Organization. While China emphasizes promoting “mutually beneficial cooperation and peaceful use of major mineral industries,” it also stressed the need to “carefully address the military use of minerals to prevent safety risks”. This move is widely interpreted as China’s strategic effort to build a “supply chain alliance” and counter the US-led drive for independence from Chinese rare earths.

The Road Ahead: De-Risking, Not Decoupling

The current rare earths landscape is a complex tapestry of interdependence and fierce competition. As a Bloomberg analyst noted, the global economy is pursuing “de-risking” rather than outright “decoupling” from China. The US and its allies are investing heavily in establishing their own mine-to-magnet supply chains, though this is a long and challenging road given China’s three decades of investment and expertise. The stakes couldn’t be higher. Control over these “vitamins of high-tech industries,” as rare earths are sometimes called, will undoubtedly shape the contours of economic and geopolitical power for decades to come. Financial analysts and investors alike must closely monitor these developments, as the “unseen war” for rare earths will dictate much of the world’s technological future and, by extension, its economic prosperity.