US, EU, and Japan move toward a plan to break Chinese dominance in Rare Earth Minerals

The News

On March 12, 2026, Bloomberg reported that the US, EU and Japan were working on a framework for a critical‑minerals trade agreement covering inputs for EVs, renewables and advanced electronics including key Rare Earths. The Office of the US Trade Representative (USTR) is leading talks with Brussels and Tokyo and would also lead negotiations on the eventual trade deal. The deal is supposed to include a price floor, setting a minimum price in order to support allied producers, preventing Chinese undercuts by flooding the market with cheap supplies. Other mechanisms potentially included in the framework include border‑adjusted tariffs, coordinated stockpiling, investment and regulatory cooperation, research collaboration, and common standards. The consultation period, a short, formal window where USTR asks the public and industry to comment on the proposed critical‑minerals trade agreement, closes on March 19th, with an announcement expected that day during an inaugural Washington visit by the new Japanese PM Sanae Takaichi elected last October.

Context

Rare Earth Minerals are crucial in the production of high-tech, clean energy, and defense applications. Demand is expected to skyrocket by 400% to 600% over the next several decades as the world transitions to a clean energy economy, with demand for minerals like lithium and graphite used in EV batteries to increase by as much as 4000%. China has long been the dominant global leader in Rare Earths. Beijing currently accounts for 70% of mining and 90% of processing, with ongoing exploration challenging the west's hold over the arctic supply of the minerals. It has used this supply as leverage in the past; in 2010, China implemented a two-month ban on exporting critical rare earth elements to Japan, which then sourced over 90% of its supply from China.

Recently, China is starting to implement restrictions again. In late 2023, China introduced export permits for gallium and germanium, followed by similar requirements for several types of graphite. Last year, they doubled down on export restrictions targeting defense and high-tech industries in the US. On January 14th, US trade proclamation under Section 232 formally designates processed critical minerals, including rare earths, as a national‑security issue and calls for strengthened domestic processing.​ In response, The White House, in partnership with EXIM bank, launched “Project Vault”, a 12‑billion‑dollar Strategic Critical Minerals Reserve as a critical‑minerals analog to the Strategic Petroleum Reserve.

Immediate Cause

By early 2026, analysts expect Chinese controls to keep rare earth products constrained, with ex‑China bottlenecks persisting at least through 2027.​ Industry reports warn that non-Chinese supply will fall short of increased demand from clean energy, electronics, and defense, with significant bottlenecks in heavy rare earths. Project Vault already reflects Washington’s view that Beijing has “weaponized” its dominance in critical minerals amid broader trade and tech tensions. Persistent industry complaints of shortages into 2026 put political pressure on governments to move from speeches to binding trade frameworks in March.

Effect

The policy will accelerate capital toward allied rare‑earth projects, while also giving more political cover to controversial options like deep‑sea mining. A secure rare earths supply chain is critical to support the AI boom, as chips manufacturers need stability to reliably deliver the market high-grade products. A unified western resistance towards Chinese REM dominance will inevitably raise economic tensions further, as China seeks to maintain its current position of leverage. As a result of the frameworks, analysts expect a more fragmented, “regionalized” market with distinct ex‑China price benchmarks and persistent price premiums outside China.

Market Impact

A two‑tier market could increase REM costs for producers that rely on Rare Earths as a part of their supply chain, but market valuations may not react given the long-term strategic importance of Rare Earth that is already priced into the lower valuations of vulnerable firms like TSMC. Established Western‑listed rare‑earth miners and processors stand to benefit from Project Vault purchases, Section 232 support, and the prospect of price floors and long‑term contracts. MP Materials (MP), Lynas Rare Earths (ASX: LYC), and Iluka Resources (ASX: ILU), are all firms that should be watched closely as the discussions unfold. Markets are beginning to price rare earths as a strategic asset, so headlines regarding these can move markets even without immediate changes in physical supply.

So in short, related sectors to Rare Earths, including technology, manufacturing, and defense, may take a short-term accounting hit that is less evidence in market valuations, but the long-term effects will be bullish as a result of securer supply chains.