America’s Big Problem With a Critical Type of Material

I’m talking about rare earth elements.

These metals and materials are critical for America’s scientific and military power.

The military uses magnets made from rare earths in everything from F-35 fighter jets to Tomahawk missiles. And rare earths are in everyday things we use – like electric vehicles, smartphones, and TVs.

Now, what we call a “rare earth element” is a misnomer…

The term “rare” refers to the fact that while we can often find these materials in nature, the process that we need to make them usable is expensive… and often difficult.

Even though rare earth elements are abundant, researchers don’t have a solid way to predict where the next deposit will be located. This further complicates things because we struggle to know where to even look for these resources.

Meanwhile, America has a specific problem when it comes to rare earth materials. And it adds yet another wrinkle to the trade war…

America Doesn’t Produce Enough Rare Earths

You see, most rare earth deposits that we know of are outside the U.S.

And China has a monopoly on the global market for these materials.

The country produces roughly 60% of the rare earth elements… and it processes about 90% of them.

That roughly 30% discrepancy comes from other countries’ mining but not processing their own rare earth elements.

Again, it’s difficult to make these materials usable after mining them.

Here in the U.S., we have a single mine producing rare earth elements.

The Mountain Pass Rare Earth Mine in California taps into the largest known deposit of rare earth elements globally. But it simply doesn’t provide the U.S. with the amount of production to meet demand.

And America only has 1.9 million metric tons of rare earth reserves. That seems like a big number… but not when compared with a staggering 44 million metric tons in China and 3.8 million metric tons in Russia.

I’ll note that Russia’s rare earth reserves did drop from 10 million metric tons in 2023 to that figure of 3.8 million metric tons last year. That drop shows just how fast war can use up these resources.

And now, as you might have heard in the news, the rare earth issue has come to a head amid the tit-for-tat tariff escalation…

On April 4, China slapped export restrictions on seven out of the 17 rare earth elements our country imports. It’s not the first time we’ve seen export restrictions from China on materials. But this exact restriction is a direct result of the tariffs from the Trump administration.

And America isn’t prepared to pick up the slack anytime soon…

Even if we do find more rare earth element deposits here, it could take 10 to 20 years just to establish production.

This looming crisis may not seem that scary right now. Rare earths don’t get the media attention like gold, iron, or copper do. And heck, the complex names of these materials might make it hard for plenty of folks to take them seriously.

But the rare earths are critical to our global military and economic power. If we can’t get enough of them to meet demand, that will harm future growth.

So amid the economic uncertainty, make sure to pay attention to what’s happening with these materials.

Good investing,

Ethan Goldman