China now accounts for about 70 percent of global rare earth production and nearly 90 percent of refining and processing. This position is the result of decades of targeted investment and industrial policy, not chance. Since the 1980s, Beijing has used subsidies and long-term planning to build dominance while Western governments largely observed without intervening. When China began to exercise this leverage in 2025 and 2026, the risk shifted from hypothetical to immediate. The supply chain gap is no longer a theoretical concern; it is now a tool of geopolitical pressure.
The Dependency Nobody Built a Plan Around
China’s dominance is not limited to rare earths. It supplies 80 percent of global tungsten and 60 percent of antimony, and controls most of the battery supply chain, including cathode materials, battery cells, and production equipment. For years, Western governments and companies treated this concentration as a byproduct of global efficiency, not as a strategic risk. That calculation changed when Beijing demonstrated how much leverage comes with control over processing.
The Year the Leverage Got Used
The situation escalated in 2025 and 2026. After a second round of US trade sanctions in April 2025, China responded with a series of export controls, culminating in broad restrictions announced in October that extended beyond rare earths to the entire lithium-ion battery supply chain. A temporary suspension of these measures followed the APEC summit, but this was a pause, not a reversal. By early 2026, China had expanded its export licensing controls and added more US companies to its restricted list, using the cooling-off period to extend its leverage rather than reduce it.
What It Actually Cost
The impact has been both immediate and significant. Prices for affected materials increased up to sixfold, and licensing approval rates for European firms dropped below 25 percent. Over 80 percent of European companies remain directly dependent on Chinese supply chains for minerals critical to defense, electric vehicles, and renewable energy. Independent estimates suggest that building alternative, independent supply chains would take two to three decades, a timeline that does not align with the current pace of geopolitical pressure.
The Response That's Real But Not Enough Yet
To be fair to the institutions now scrambling to respond, meaningful diversification efforts are genuinely underway, not merely announced. The United States and Australia are pursuing diversification efforts, with some real progress. The United States and Australia signed a Critical Minerals Framework in October 2025 to expand mining and processing capacity. Australia now leads as the primary US partner, attracting nearly half of global rare earth exploration investment in 2024 and hosting 89 active projects, compared to 18 in Canada, 13 in Brazil, and 12 in the United States. A US$1.25 billion government loan is supporting Iluka Resources in building a dedicated refinery linked to allied offtake agreements. The European Union’s Critical Raw Materials Act has approved 47 strategic projects within the EU and 13 outside. The FORGE initiative has assembled 21 bilateral agreements with resource-rich countries and participation from major manufacturers. NATO has also recognized rare earths as a defense security issue, with twelve allied nations launching a joint acquisition and materials management initiative, specifically regarding light rare earth elements. China retains extraordinary, largely unchallenged leverage over heavy rare earth elements, materials like dysprosium and terbium that are essential to EV motors, wind turbines, and defense applications, precisely the category where Western alternative capacity remains furthest behind.
The Closing Window
Analysts tracking this dynamic frame the choice facing Western governments and corporations as a genuine strategic trilemma: accept ongoing managed dependence on China, pursue costly independent supply chain development estimated at US$30 to 50 billion over five to seven years, or adopt a hybrid resilience model combining stockpiling, diverWestern governments and companies now face a strategic choice: continue managed dependence on China, invest US$30 to 50 billion over five to seven years to build independent supply chains, or pursue a hybrid approach that combines stockpiling, diversification, and material substitution. The decision window is narrow—current analysis suggests 12 to 18 months—because Beijing has calibrated its restrictions to maximize leverage without provoking the kind of sustained scarcity that would force large-scale Western investment in alternatives. And now, precisely the kind of enterprise risk that belongs on the same board-level agenda as cybersecurity and geopolitical scenario planning, rather than left to specialist procurement teams operating with limited executive visibility.
The practical question is whether your organization’s exposure to critical minerals is mapped and managed at the board level, or still treated as a procurement issue. The answer will determine how prepared you are for the next phase of supply chain risk.
