When President Trump travels to Beijing early next year to finalize a new trade deal, China will deploy one of its favorite pressure tactics: restricting exports of rare earth elements.

Last month, The New York Times’s Thomas Friedman warned that China’s threat to cut off rare earth exports could “trump Trump’s tariffs tenfold.” He’s right that Beijing sees these minerals as strategic leverage, but the real story is more complicated. The market is small, innovation is closing the gap, and allied countries are building alternative supply chains faster than many realize.

Critical minerals encompass dozens of materials essential to modern technology, from lithium and graphite for batteries to gallium for semiconductors. Rare earth elements are a specific subset of 17 metals within this broader category. While China has important leverage points with other critical minerals, rare earth elements are China’s negotiating weapon of choice.

In April 2015, after Trump imposed new tariffs, China imposed export controls on rare earth elements and finished magnets, seeking to inflict immediate supply chain pain during negotiations. Friedman’s larger point — that Beijing sees rare earths as negotiation leverage — is consistent with China’s actions. But the U.S. can blunt that leverage through smart investment and policy, without overreacting.

Rare earths aren’t rare in the earth’s crust; what’s rare is the capability to separate and refine them efficiently. The chemistry of the process is complex, and often creates radioactive waste. That’s why China came to dominate the market — it invested in processing technology and accepted the environmental costs that others wouldn’t.

But that dominance has limits. The rare earth mining base is geographically diverse, and new refining capacity is coming online in Australia, Jordan and even the United States. The War Department recently committed nearly $700 million in loans to U.S. firms — Vulcan Elements and ReElement Technologies — to build domestic magnet facilities that could replace roughly half of current imports within a few years.

The entire global rare-earth market is important, but it is worth only $5 billion to $10 billion annually — much less than Americans spend on pet food. That small scale means that China can manipulate prices during the next year. However, regaining even a modest share of global processing is not cost-prohibitive and could undercut Beijing’s influence.

Sure, restricting rare earth element exports would cause disruptions — price spikes, supply-chain strain, production slowdowns for defense contractors and electric vehicle manufacturers. But we’re entering a negotiation phase that will unfold over many months, even years. And while Beijing postures, alternatives are advancing.

Recycling and innovations are closing the gap far faster than most analysts expected. Unlike oil or plastics, rare earths can be reused indefinitely. Moreover, recycling rare earth elements is not a dirty process compared to new processing. Companies like Urban Mining recover them from discarded electronics, and Apple reclaims neodymium from old iPhones. The global recycling market — roughly $1.5 billion today — is expected to more than double by 2032.

In Minnesota, Niron Magnetics is developing permanent magnets made entirely without rare earths. Its iron-nitride technology performs as well as — or better than — traditional rare-earth magnets at high temperatures. Investors include GM, Stellantis and Samsung. Niron has already broken ground on its first plant.

Niron’s breakthroughs, supported by Aims National Laboratory and Oak Ridge National Laboratory, show how targeted federal research and development can yield enormous strategic returns. Beyond new materials, there’s an even faster path to independence that’s already operational.

Production in allied countries is another option. One of the authors of this op-ed worked on a rare-earth project in Jordan. The geology was promising, the engineering straightforward, and new separation technology meant a processing facility could launch within a year. But no investor would commit to an overseas venture when China could crash prices on a whim. That’s Beijing’s real weapon: not scarcity, but market manipulation that freezes Western investment.

The solution is simpler than most think. The U.S. just needs to de-risk private investment. The Development Finance Corporation can provide loan guarantees, the Defense Logistics Agency can offer price floors against Chinese dumping, and the U.S. Trade and Development Agency can fund feasibility studies. These aren’t expensive programs. With existing funding levels, the U.S. could catalyze a decade of allied rare-earth development.

Beijing wants to convince Washington that rare earths are its trump card. They’re not. This is a small market vulnerable to innovation, recycling and modest investment. China’s leverage is fading — and if the U.S. keeps its composure, that “weapon” will soon look more like a bluff.

Elaine Dezenski is the senior director and head of the Center on Economic and Financial Power *at the Foundation for Defense of Democracies , where Daniel Swift is a senior research analyst and a retired U.S. diplomat. *

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