In what ways could the emerging US‑Japan rare‑earth partnership alter global supply‑chain geopolitics, affect China’s market dominance, and influence allied industrial policies?
The emerging US-Japan rare-earth partnership represents a structural realignment in global supply-chain geopolitics, fundamentally shifting the strategic logic from market-driven commodity procurement to security-oriented bloc-based integration. This analysis examines how this partnership is altering geopolitical dynamics, eroding China's market dominance, and catalyzing allied industrial policy transformation.
The October 2025 framework agreement signed by President Trump and Prime Minister Takaichi established the first comprehensive end-to-end approach to rare earth supply chain security between two allied nationsHow the US–Japan Critical Minerals Partnership Is a Long-Overdue ...columbia . The partnership represents an acknowledgment that the clean energy transition and modern defense industries rest on fragile foundations controlled by a strategic competitorHow the US–Japan Critical Minerals Partnership Is a Long-Overdue ...columbia .
The partnership has fundamentally transformed rare earth elements from global commodities into strategic bloc assets. Japan and the United States are leveraging private capital and tapping into a host of financial tools to bolster development of rare earth projects, including grants, offtake agreements, and government equity stakes in companiesUS, Japan strike pact on rare earths, minerals, coaleenews . The framework covers the entire supply chain, from mining and separation to derivative products such as permanent magnets, batteries, and catalystsJapan, US join forces to secure critical mineralsargusmedia .
The establishment of a US-Japan Critical Minerals Supply Security Rapid Response Group, led by Energy Secretary Chris Wright and Japan's Minister for Economy, Trade and Industry Ryosei Akazawa, demonstrates the operationalization of this allianceDon't miss tomorrow's Manufacturing industry newsmanufacturingdive +1. This group will prioritize specific minerals, identify supply vulnerabilities, and develop plans for faster deliveryDon't miss tomorrow's Manufacturing industry newsmanufacturingdive .
The strategic urgency driving this partnership stems from the extraordinary vulnerability of allied defense systems. A single Virginia-class submarine contains approximately 9,200 pounds of rare earths, and each F-35 fighter jet requires more than 920 poundsMinerals, Magnets, and Military Capability: China's Rare Earth ...westpoint +1. Approximately 78% of all US weapon systems rely on materials sourced from ChinaRace for the Future : US Rare Earth Dependence and Vulnerability to Chinayoutube , creating what defense analysts describe as a "five alarm fire for national security"Race for the Future : US Rare Earth Dependence and Vulnerability to Chinayoutube .
The National Defense Authorization Act mandates complete independence from China's rare earth supply chain by 2035, with defense contractors required to certify zero Chinese content in their supply chains by January 1, 2027Race for the Future : US Rare Earth Dependence and Vulnerability to Chinayoutube +1. The partnership directly addresses this timeline by creating secured bilateral supply chains for defense-critical materials.
China maintains commanding positions across the rare earth value chain. It controls approximately 60-70% of global mining and a staggering 85-91% of separation and refining capacityIEEE Spectrum's Top Rare Earth Elements Stories of 2025ieee +2. For rare earths, the top three refiners controlled 97% of refined output in 2024, with China alone representing 91%Global Critical Minerals Outlook 2025windows . China produces over 95% of battery-grade graphite and rare earths by both geography and ownershipGlobal Critical Minerals Outlook 2025windows .
The dominance is even more pronounced in heavy rare earths critical for high-performance magnets. China controls over 98-99% of global dysprosium separationfinancialmodelingprep , with virtually 100% of commercial heavy rare earth separation occurring within Chinese bordersTHE RARE EARTH IMPERATIVEadlittle . For permanent magnet production, China commands approximately 90-93% of global outputOct 9, 2025: China's Ministry of Commerce issued Announcements No. 61 & 62, expanding rare earth export controls to 12 of 17 elements and imposing extraterritorial licensing requirements. This is direct retaliation for U.S. semiconductor export bans announced days earlier. China controls 70% of global mining, 90% of processing, and 93% of permanent magnet production. Each F-35 requires 417kg of rare earths. China refines 100% of global samarium. What does this mean for U.S. defense? How will this affect AI data centers? What happens to semiconductor and EV supply chains? Let's dive in:x +1.
The US-Japan partnership is surgically targeting the most strategically valuable segments rather than attempting to compete with China's volume-based dominance. Non-China rare earth oxide production has risen from approximately 7% of the global total in 2017 to an estimated 21% in 2025Non-China rare earth supply chain gains momentum - fDi Intelligencefdiintelligence . The IEA projects China's share of refined output will fall from 91% today to 75% by 2040Global Critical Minerals Outlook 2025windows .
Japan has already demonstrated the viability of this approach. Japanese dependence on Chinese rare earths dropped from approximately 90% at the time of the 2010 Senkaku Islands dispute to roughly 60% todayJapan has cut its rare-earth dependence on China from around 90% to only about 60% in 15 years. The US faces a similarly long road to rebuilding its ability to refine and process such minerals. https://t.co/34f9GV9DgG https://t.co/WKos5X5PN7x +1. Japan's consumption of rare earths is now half the level of what it was thenHow Japan solved its rare earth minerals dependency issue | World Economic Forumweforum .
China has responded to the partnership with escalating export controls and bureaucratic weaponization of its supply chain dominance. In April 2025, China announced export controls on seven medium and heavy rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttriumGlobal Critical Minerals Outlook 2025windows . This was subsequently expanded to 12 of 17 elements with extraterritorial licensing requirementsOct 9, 2025: China's Ministry of Commerce issued Announcements No. 61 & 62, expanding rare earth export controls to 12 of 17 elements and imposing extraterritorial licensing requirements. This is direct retaliation for U.S. semiconductor export bans announced days earlier. China controls 70% of global mining, 90% of processing, and 93% of permanent magnet production. Each F-35 requires 417kg of rare earths. China refines 100% of global samarium. What does this mean for U.S. defense? How will this affect AI data centers? What happens to semiconductor and EV supply chains? Let's dive in:x .
The impact has been immediate and severe. In April-May 2025, rare earth magnet exports to Japan collapsed by 91% and to South Korea by 93%China doesn’t need missiles to choke American industry. It uses paperwork. Like a boa constrictor, it tightens slowly, silently, and relentlessly, until supply chains stop breathing. In April–May 2025, rare earth magnet exports to Japan collapsed by 91%. South Korea? 93%. No embargo. No announcement. No press conference. Just “processing delays” A 45-day license review magically became 120 days. Factories stalled. Just-in-time logistics imploded. Defense production froze. This wasn’t incompetence. It was weaponized bureaucracy. On January 6, 2026, China, once again, pulled the same lever against Japan, triggered by a single offensive sentence about Taiwan. Now comes the real collision. China controls 99% of heavy rare earth processing, the materials every modern weapons system depends on. On January 1, 2027, US defense contractors are legally required to certify zero Chinese content in their supply chains. That requirement isn’t ambitious. It’s mathematically impossible. The Pentagon knows this. Wall Street is still asleep. The clock is ticking. 11 months left. And when the timer hits zero, there won’t be a missile strike, just empty warehouses, stalled production lines, and a US defense industry gasping for materials it no longer controls..... 😂😂😂😂x +1. This was achieved without formal embargo through bureaucratic means—a 45-day license review magically became 120 daysChina doesn’t need missiles to choke American industry. It uses paperwork. Like a boa constrictor, it tightens slowly, silently, and relentlessly, until supply chains stop breathing. In April–May 2025, rare earth magnet exports to Japan collapsed by 91%. South Korea? 93%. No embargo. No announcement. No press conference. Just “processing delays” A 45-day license review magically became 120 days. Factories stalled. Just-in-time logistics imploded. Defense production froze. This wasn’t incompetence. It was weaponized bureaucracy. On January 6, 2026, China, once again, pulled the same lever against Japan, triggered by a single offensive sentence about Taiwan. Now comes the real collision. China controls 99% of heavy rare earth processing, the materials every modern weapons system depends on. On January 1, 2027, US defense contractors are legally required to certify zero Chinese content in their supply chains. That requirement isn’t ambitious. It’s mathematically impossible. The Pentagon knows this. Wall Street is still asleep. The clock is ticking. 11 months left. And when the timer hits zero, there won’t be a missile strike, just empty warehouses, stalled production lines, and a US defense industry gasping for materials it no longer controls..... 😂😂😂😂x . Factories stalled and just-in-time logistics implodedChina doesn’t need missiles to choke American industry. It uses paperwork. Like a boa constrictor, it tightens slowly, silently, and relentlessly, until supply chains stop breathing. In April–May 2025, rare earth magnet exports to Japan collapsed by 91%. South Korea? 93%. No embargo. No announcement. No press conference. Just “processing delays” A 45-day license review magically became 120 days. Factories stalled. Just-in-time logistics imploded. Defense production froze. This wasn’t incompetence. It was weaponized bureaucracy. On January 6, 2026, China, once again, pulled the same lever against Japan, triggered by a single offensive sentence about Taiwan. Now comes the real collision. China controls 99% of heavy rare earth processing, the materials every modern weapons system depends on. On January 1, 2027, US defense contractors are legally required to certify zero Chinese content in their supply chains. That requirement isn’t ambitious. It’s mathematically impossible. The Pentagon knows this. Wall Street is still asleep. The clock is ticking. 11 months left. And when the timer hits zero, there won’t be a missile strike, just empty warehouses, stalled production lines, and a US defense industry gasping for materials it no longer controls..... 😂😂😂😂x .
On January 6, 2026, China prohibited dual-use goods, including some rare earth elements, from being exported to Japan with immediate effectHow Will China's New Export Controls Impact Japan? - The Diplomatthediplomat . The measure was triggered by remarks from Prime Minister Takaichi regarding Taiwan, demonstrating China's willingness to use rare earths as a tool of coercive diplomacyChina's Rare Earth Campaign Against Japan - CSIScsis +1.
Paradoxically, despite these restrictions, China's rare earth exports in 2025 hit the highest level since at least 2014 at 62,585 metric tons, a 12.9% annual increaseChina's 2025 rare earth exports hit highest since at least 2014 ...reuters . This dual-track approach—maintaining commercial flows while selectively restricting strategic customers—demonstrates sophisticated supply chain weaponization.
The partnership has catalyzed a fundamental shift in how market-oriented economies approach critical mineral security. Early projections suggest joint projects under the framework could attract between $2-3 billion in combined public and private investment over the next five yearsJapan–US Rare Earths Deal: Securing Critical Minerals ...sfa-oxford . Japan has committed to facilitating $550 billion in US investments across key sectors including critical minerals mining, processing, and refiningU.S.-Japan Critical Minerals Agreement: Background and ...congress +1.
Japan's model for supply chain resilience—developed through 15 years of post-2010 crisis experience—is being exported to allied nations. The Japan Organization for Metals and Energy Security (JOGMEC) has systematically treated mineral supply chains as strategic infrastructure, deploying equity stakes, loans, debt guarantees, and technical assistanceHow the US–Japan Critical Minerals Partnership Is a Long-Overdue ...columbia . Japan has implemented public-private support measures including expanding JOGMEC's investment framework and allocating a total budget of $3.5 billionJapan Warns of Fragile Mineral Supply Chains at US-Led Global Summit to Counter China | AC1Gyoutube .
The partnership has normalized direct government equity participation in critical mineral companies. The Pentagon struck a landmark deal with MP Materials in July 2025 that included a price floor, offtake agreement, and equity position making the US government the company's largest shareholder with a 15% stakeU.S. plans critical mineral price floors with Mexico, EU and Japancnbc +2. The Department of Defense guaranteed a floor price of $110 per kilogram for neodymium-praseodymium—nearly double China's prevailing ratesDoD Backs MP Materials (MP) in $110/kg Rare Earth Pricing Dealnasdaq .
This price floor mechanism has become a central tool for allied industrial policy. The United States has developed a sophisticated price floor system that it is pitching to allies as the administration and more than 50 countries look to reduce dependence on ChinaUS agencies have developed critical minerals price floor systemmining . As Under Secretary of State Jacob Helberg stated, "pricing is the key to unlocking private investment"US agencies have developed critical minerals price floor systemmining .
The $12 billion Project Vault initiative, announced February 2, 2026, represents the first-of-its-kind strategic stockpile for the private sector of critical mineralsTrump Launching $12 Billion Strategic Minerals Stockpileyoutube +1. The Export-Import Bank approved a $10 billion loan—the largest in EXIM's 92-year history—complemented by approximately $1.67 billion in private capitalProject Vault: A Minerals Security Backstop - CSIScsis +1.
The stockpile will include all 60 minerals on the US Geological Survey's 2025 Critical Minerals List, with particular emphasis on the 17 rare earth elementsProject Vault: A Minerals Security Backstop - CSIScsis +1. Major manufacturers including General Motors, Boeing, GE Vernova, and Google are participatingTrump Unveils $12 Billion Critical Minerals Stockpilenytimes +1.
The US-Japan framework has expanded into trilateral cooperation with the European Union. Ambassador Greer announced that the United States, the European Commission, and Japan intend to develop Action Plans for critical minerals supply chain resilience, laying the groundwork for a binding plurilateral agreement on trade in critical mineralsAmbassador Greer announced that the United States, the European Commission, and Japan intend to develop Action Plans for critical minerals supply chain resilience, laying the groundwork for a binding plurilateral agreement on trade in critical minerals with like-minded partners. Learn more: https://t.co/eENaDYMSkVx +1. The US and EU plan a memorandum of understanding on critical mineral supply chain security within 30 daysU.S. plans critical mineral price floors with Mexico, EU and Japancnbc +1.
The State Department hosted a Critical Minerals Ministerial attended by 54 countries and the European Commission, explicitly excluding ChinaThe US Critical Minerals Ministerial and Industrial Policyconference-board . This resulted in Project FORGE (Forum on Resource Geostrategic Engagement), building on the Minerals Security Partnership to include both consuming and producing countriesThe US Critical Minerals Ministerial and Industrial Policyconference-board .
The partnership has triggered policy responses across allied nations:
South Korea maintains a longstanding stockpile of critical minerals managed by the state-run Korea Mine Rehabilitation and Mineral Resources CorporationTrump’s critical minerals meet: Who’s attending, what’s at stake?aljazeera . American and Korean companies will partner to launch a US-based, vertically integrated rare earth separation, mining, and magnet production complexUnderstanding the Japan, Korea Frameworks - NAMnam . However, Korea has yet to establish a dedicated, legally binding instrument comparable to the US-Japan Critical Minerals AgreementKorea's Critical Minerals Agreements: From MOUs, To Three ... - KIEPkiep .
Australia signed a framework agreement in October 2025 with a $1 billion financing commitment for HREE investmentsHeavy Rare Earth Elements: Rising Supply Chain Risks ...globalpolicywatch . Australia announced a $1.2 billion Critical Minerals Strategic ReserveTrump’s critical minerals meet: Who’s attending, what’s at stake?aljazeera .
The European Union adopted the RESourceEU Action Plan in December and plans to establish a European Critical Raw Materials Centre early in 2026Trump’s critical minerals meet: Who’s attending, what’s at stake?aljazeera . The EU sources all of its heavy REEs and 85% of its light REEs from China, as well as 98% of its rare-earth magnetsChina's rare-earth export restrictionseuropa .
MP Materials achieved record NdPr oxide production at Mountain Pass and record NdPr metal output at its Independence facility in TexasMPMC Q3 2025 ERq4cdn . The company began production of magnetic precursor products in December 2024 and anticipates manufacturing NdFeB permanent magnets by end of 2025MP Materials stock | 2026 rating, price & analyst opinionsgrowthinvesting . The Independence facility is designed to produce approximately 1,000 metric tons of finished magnets annually, with gradual ramp beginning in late 2025 MP Materials - MP Materials Restores U.S. Rare Earth Magnet Production mpmaterials .
The company plans to commission its new heavy rare earth separation facility at Mountain Pass in mid-2026, with nameplate capacity of 200 metric tons per year of dysprosium and terbiumMPMC Q3 2025 ERq4cdn +1. MP's planned "10X" magnet manufacturing facility is scheduled to begin operations in 2028, with production backed by existing offtake agreements, scaling total magnet capacity to 10,000 metric tons annuallyUS rare earth producer MP Materials is expected to commence | SMMmetal +1.
The Pentagon price floor of $110/kg for NdPr became operational October 1, 2025Pentagon-backed Agreement Creates Revenue Floor, Boosting MP Materialsad-hoc-news . Current NdPr prices have surged above this floor to $123/kg, driven by China supply tightening and strong EV and defense magnet demand🔥 JUST IN: Rare earth prices surge above U.S. price floor for MP Materials. NdPr hits $123/kg vs $110/kg support. Driven by China supply tightening + strong EV & defense magnet demand. China controls ~90% refining capacity. $MP https://t.co/0gqTelw33Rx .
Lynas became the first producer of separated heavy rare earths outside China when it produced separated dysprosium at its Malaysian plant in May 2025Lynas produces separated heavy rare earths in Malaysiaargusmedia . The company built dysprosium and terbium processing circuits capable of separating up to 1,500 tonnes per year of heavy rare earthsLynas produces separated heavy rare earths in Malaysiaargusmedia .
Lynas announced a $180 million expansion project to build a new heavy rare earth separation facility with capacity to process up to 5,000 tonnes per annum of HRE feedstockLynas announces A$180m new Malaysia heavy rare earths facilityminingweekly +1. First samarium production is expected in April 2026, with full-scale separation capacity to follow within two yearsLynas Doubles Down in Malaysia: Heavy Rare Earth Expansion Marks Strategic Inflection Pointrareearthexchanges +1.
Japan invested $250 million in Lynas in 2011, providing crucial equity and loans in exchange for long-term supply commitmentsTHE RARE EARTH IMPERATIVEadlittle +1. This early patient investment exemplifies Japan's strategy of securing separation capacity outside China.
The JOGMEC-REAlloys memorandum of understanding represents Japan's first engagement with a US-based rare earth companyREalloys-MCM pact leads to unconventional route to the US rare ...alcircle . JOGMEC will facilitate licensing and transfer of Japanese separation and magnet-fabrication technologies to REAlloys' North American facilitiesUS REAlloys, Japan's JOGMEC Sign Strategic Pact on Rare Earth ...metal +1.
The agreement covers the entire supply chain: upstream mining assets in Saskatchewan, a midstream separation facility in Saskatoon, and downstream magnet production in OhioU.S. Rare Earth Company Signs Strategic Deal With Japanese Governmentoilprice +1. REAlloys expects to deliver its first North American sourced heavy rare earth output for advanced applications by early 2027, aligned with US defense procurement deadlines[PDF] Introduction – The Magnet Revolution - REalloys, Inc.realloys .
Production targets include approximately 525 tonnes per year of NdPr metal, along with roughly 30 tonnes of dysprosium oxide and 10 tonnes of terbium oxide annually[PDF] Introduction – The Magnet Revolution - REalloys, Inc.realloys . A scaled facility would target approximately 245 tonnes of heavy rare earth metals (200 tonnes dysprosium, 45 tonnes terbium) and 3,000 tonnes of NdPr metal annually[PDF] Introduction – The Magnet Revolution - REalloys, Inc.realloys .
Japan successfully retrieved rare-earth-rich seabed mud from depths of approximately 6 kilometers during test operations in early February 2026Japan retrieves rare earth mud from deep seabed in test missionreuters +1. The scientific drill ship Chikyu departed January 12 and confirmed successful retrieval on February 1Japan retrieves rare earth mud from deep seabed in test missionreuters .
The mud is believed to contain dysprosium, neodymium, gadolinium, and terbiumJapan retrieves rare earth mud from deep seabed in test missionreuters . A full-scale mining trial is planned for February 2027 with the goal of collecting approximately 350 tonnes of sediment per dayJapan collects rare earth mud from deep waters off island in Pacificmainichi . The government plans to assess industrialization feasibility by March 2028Japan collects rare earth mud from deep waters off island in Pacificmainichi .
This represents potential US-Japan joint development. Prime Minister Takaichi stated: "We will consider specific ways to promote cooperation between Japan and the United States on rare earth development around Minamitori Island"Japan, US consider rare earth mining near Minamitori in Pacific, PM Takaichi says | Reutersreuters .
Despite significant progress, the partnership has not resolved the critical heavy rare earth chokepoint. China still controls over 98% of global dysprosium separationfinancialmodelingprep . Global dysprosium production averages approximately 400-500 metric tons annually, while terbium output remains constrained at 100-150 metric tons per yearHeavy Rare Earth Shortages: Supply Chain Crisis 2025discoveryalert .
Non-Chinese separation capacity represents less than 10% of global heavy rare earth refining capability, with cost differentials of 5-7 times higher for Western processing facilities compared to Chinese operationsHeavy Rare Earth Shortages: Supply Chain Crisis 2025discoveryalert . Significant undersupply with a projected deficit of up to 50% is expected in 2030 and beyond for dysprosium and terbiumTHE RARE EARTH IMPERATIVEadlittle .
A fundamental tension exists between the partnership's implementation timeline and defense procurement deadlines. As Greg Hayes of Raytheon stated in 2023: "More than 95% of rare earth materials come from, or are processed in, China. There is no alternative. If we had to pull out of China, it would take us many many years to re-establish that capability"Chinese Rare Earths Help Power U.S. Defense, Militaryforeignpolicy .
The real capacity surge is not expected until 2026-2027, when Australia's Iluka and Arafura projects come onlineThe Rare Earth Pause: A Strategic Assessmentpf . Building alternative supply chains could take as long as 10 yearsCHINA CALLS THE EMPIRE’S BLUFF Or…The Mother of All FAFOs. With one single move, Beijing weaponized the ENTIRE Rare Earth supply chain. By applying veto power over the sale of ANY product containing over 0.1% of Chinese rare earth - WHEREVER it is manufactured. Building alternative supply chains could take as long as 10 years. In a nutshell, the whole American industrial policy from now on is being written by Chinese MOFCOM bulletins. Like this one: https://t.co/00bXfi47kN Whatever the shrillness of the temper tantrums thrown by the Tariff Titan, nothing will change the battlefield. Beijing has turned the chessboard upside down by introducing TECH DECAPITATION. Enjoy the show. H/T https://t.co/IJXr2An65mx .
If imports of rare earths from China were cut off with supply constraints continuing for one year, Japan's real GDP would likely decline by approximately 1.3% (around 7 trillion yen) and employment would be reduced by about 1.3% (approximately 0.9 million people)China’s Export Restrictions on Rare Earths and Other Critical Minerals May Reduce Japan’s Real GDP by 1.3–3.2%dir . If other critical minerals were also affected, the decline could widen to around 3.2% for real GDP and employmentChina’s Export Restrictions on Rare Earths and Other Critical Minerals May Reduce Japan’s Real GDP by 1.3–3.2%dir . Transportation machinery—including Japan's core automobile industry—would see a real GDP decline of 17.6%China’s Export Restrictions on Rare Earths and Other Critical Minerals May Reduce Japan’s Real GDP by 1.3–3.2%dir .
Dimension | Pre-Partnership Status | Post-Partnership Trajectory | |
|---|---|---|---|
| Supply Chain Logic | Just-in-time, lowest cost | Just-in-case, security of supply | |
| China's Role | Single-source refinery | Entity of concern to be bypassed | |
| Government Role | Regulatory oversight | Venture capitalist and insurer | |
| Market Structure | Global commodity | Ideological industrial bloc | |
| Non-China Processing | ~9% (2017) | ~25% projected (2026-2028) | |
| Heavy REE Independence | Near zero | Pilot scale by 2027-2028 |
The US-Japan rare earth partnership represents the most significant structural intervention in critical mineral markets since China consolidated its dominance in the 1990s-2000s. While the partnership has successfully created mechanisms for price stabilization, demand aggregation, and technology transfer, it has not yet resolved the fundamental heavy rare earth chokepoint that remains the partnership's critical vulnerability. The coming 24-36 months will determine whether the pilot projects and policy frameworks translate into production capacity sufficient to provide genuine strategic autonomy from Chinese supply chains.