Rare Earth Shortages Are Getting Worse — Even After the Trade Truce
Despite a widely publicized trade truce between the United States and China, rare earth material shortages are continuing to deepen across America's aerospace and semiconductor industries, according to a Reuters exclusive published this week. Sources familiar with supply chain operations told Reuters that the situation on the ground remains critical, with manufacturers struggling to secure key materials needed to build everything from fighter jets to advanced microchips. The report underscores a growing vulnerability at the heart of the U.S. economy — one that trade negotiations alone appear unable to fix.
Rare earth elements — a group of 17 metallic elements that includes neodymium, dysprosium, and lanthanum — are essential to the production of powerful magnets, guidance systems, electric motors, radar equipment, and the high-performance chips that power artificial intelligence. China controls an estimated 60–70% of global rare earth mining and an even larger share of processing capacity, giving it significant leverage over global supply chains despite ongoing U.S. efforts to diversify.
Photo by Hive Electronics LLP on Unsplash | Source
What the Reuters Report Actually Found
According to Reuters' reporting, sourced from multiple industry insiders and supply chain specialists, the shortages are being felt across two particularly critical sectors:
- Aerospace and defense: Manufacturers of aircraft components, missile guidance systems, and military hardware are reportedly facing longer lead times and in some cases outright shortages of specific rare earth compounds needed for high-performance magnets and electronic components.
- Semiconductors and advanced chips: Chipmakers relying on rare earth-derived materials for specialized manufacturing steps — particularly in compound semiconductors and certain photolithography processes — are also experiencing supply constraints that the trade truce has not resolved.
Sources cited by Reuters described the situation as worsening rather than stabilizing, even as diplomatic messaging from both Washington and Beijing has emphasized progress in trade relations. The gap between public statements and ground-level reality appears to be significant, according to the report.
The Reuters investigation also noted that some U.S. companies have been quietly stockpiling available rare earth materials as a hedge against further disruptions — a strategy that itself contributes to tighter near-term supply.
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Why the Trade Truce Hasn't Solved the Problem
The persistence of shortages despite diplomatic progress reflects structural realities that tariff negotiations were never designed to address. Experts have long argued that America's rare earth problem is not simply a trade dispute — it is a supply chain architecture problem decades in the making.
Here's why the trade truce has had limited impact on the shortage:
- Processing bottlenecks: Even if raw rare earth ores can be imported, the refining and processing infrastructure needed to turn them into usable materials barely exists in the United States. China dominates this processing capacity globally.
- Long development timelines: Building new rare earth mines and processing facilities takes years — sometimes a decade or more — from initial investment to operational output. Projects announced in response to earlier trade tensions are still years away from meaningful production.
- Demand acceleration: The explosive growth of AI data centers, electric vehicles, and advanced defense systems is driving rare earth demand upward at a pace that new supply sources cannot currently match.
- China's export controls: Beijing has, according to various industry reports, maintained selective controls on the export of certain processed rare earth materials and technology, even amid broader trade truce discussions.
According to the Bipartisan Policy Center and other research groups, the U.S. currently has only one operational rare earth mine — the Mountain Pass facility in California — and it still ships much of its ore to China for processing. This creates a fundamental dependency that trade agreements do not address.
The Stakes for U.S. Defense and Technology
The implications of ongoing rare earth shortages extend well beyond corporate supply chains. Defense analysts and national security experts have flagged rare earth dependency as a strategic vulnerability for years. The materials are integral to:
- F-35 fighter jets and other advanced aircraft, which require rare earth magnets in actuators and electronics
- Guided missile systems, which rely on rare earth elements in targeting and propulsion components
- Radar and sonar systems used by the U.S. Navy
- AI accelerator chips and advanced semiconductors used in both commercial and defense applications
For the commercial technology sector, the Reuters report's findings carry significant weight at a moment when the AI boom is accelerating demand for advanced chips. Companies like NVIDIA, AMD, and Intel — all of which have been reporting strong AI-driven demand — depend on supply chains that ultimately trace back to rare earth materials at multiple points.
Bank of America's recent reset of AMD's stock price target, following AMD's deal with Meta, reflects how closely Wall Street is watching the semiconductor space. Supply chain constraints on rare earth materials represent a risk factor that analysts are increasingly factoring into their assessments of chip company valuations.
What the U.S. Government Is Doing — And What Critics Say
The Trump administration has publicly emphasized domestic resource development as a priority, and the Department of Defense has funded several rare earth supply chain initiatives in recent years. The Pentagon has awarded contracts to support domestic rare earth processing and has worked to accelerate development at alternative international sources, including partnerships with Canada, Australia, and select African nations.
However, critics argue that these efforts remain insufficient relative to the scale of the problem. According to Reuters' sources, the gap between U.S. rare earth needs and domestic supply is not expected to close meaningfully for at least several more years, even under optimistic development scenarios.
Some industry advocates are calling for:
- Accelerated permitting for new domestic mining operations, which currently face lengthy environmental review processes
- Direct government investment in rare earth processing infrastructure, similar to the CHIPS Act model for semiconductor manufacturing
- Strategic stockpile expansion, building on the Defense Logistics Agency's existing National Defense Stockpile
- Allied nation partnerships to develop processing capacity outside of China
Whether the current administration will move aggressively on these fronts remains to be seen. What is clear from the Reuters reporting is that the problem is not waiting for policy solutions to catch up.
What This Means for Consumers and Investors in 2026
For everyday consumers, the most immediate effects of rare earth shortages may manifest as higher prices or longer wait times for electronics, electric vehicles, and certain defense-related technologies — though these effects tend to work through supply chains slowly before reaching retail prices.
For investors, the Reuters report reinforces the long-term investment thesis around rare earth mining and processing companies outside of China, including MP Materials (which operates Mountain Pass), as well as companies in Australia and Canada working to build out alternative supply chains. It also highlights a risk factor for technology and defense contractors that is not always prominently discussed in earnings calls.
As the U.S. continues to pour investment into AI infrastructure, semiconductor manufacturing, and defense modernization, the rare earth bottleneck represents one of the most concrete physical constraints on those ambitions. According to the Reuters report, that constraint is getting tighter — not looser — despite the diplomatic progress being celebrated in other arenas.
Frequently Asked Questions
What are rare earth elements and why are they important?
Rare earth elements are a group of 17 metallic elements essential to manufacturing advanced magnets, semiconductors, aerospace components, and AI hardware. Without them, modern electronics, military systems, and electric vehicles cannot be produced.
Why is the US still facing rare earth shortages despite the trade truce with China?
The trade truce addressed tariff disputes but did not resolve the structural problem: China controls the majority of global rare earth processing capacity, and the U.S. lacks sufficient domestic refining infrastructure. Building new facilities takes years, meaning shortages persist regardless of diplomatic progress.
How do rare earth shortages affect the semiconductor and AI industry?
Rare earth materials are used at multiple points in chip manufacturing, including in compound semiconductors and specialized components. Shortages can slow production, increase costs, and create bottlenecks for AI hardware companies like NVIDIA and AMD that are already operating under high demand.
What is the US government doing to address rare earth supply chain vulnerabilities?
The Department of Defense has funded domestic rare earth initiatives and partnered with allied nations including Canada and Australia. However, critics say current efforts fall far short of closing the supply gap, which is not expected to meaningfully improve for several years.
Which US companies are involved in domestic rare earth production?
MP Materials operates the Mountain Pass mine in California, the only currently active rare earth mine in the US. However, much of its ore is still processed in China, highlighting the gap between mining capacity and full domestic supply chain independence.
