Are the most strategic resources of the 21st century more powerful than oil when it comes to shaping global alliances? In Tokyo’s Akasaka Palace, US President Donald Trump and Japan’s newly elected Prime Minister Sanae Takaichi inked a framework agreement designed to overhaul the rare earths and critical minerals supply chain. The deal is aimed squarely at reducing dependence on China, which processes more than 90% of the world’s rare earth elements materials essential for everything from electric vehicle motors and wind turbines to precision-guided munitions and advanced semiconductors.
For Japan, the urgency is rooted in a painful memory: the 2010 “rare earth shock.” That year, a maritime dispute near the Senkaku Islands triggered Beijing to halt exports of rare earths to Japan, cutting off roughly 70% of its supply and sending shockwaves through its high-tech manufacturing sector. The episode exposed the fragility of supply chains for neodymium, dysprosium, and other elements used in permanent magnets, catalysts, and optical devices. Takaichi, a longtime advocate of economic security, has vowed to ensure that such a disruption never happens again.
The agreement goes beyond symbolic alignment. According to the White House, Washington and Tokyo will coordinate investment and policy to develop diversified and transparent markets for critical minerals. Within six months, the two nations will identify and fund new mining and processing projects for materials key to magnets and batteries. A joint “Rapid Response Group” will be created to detect vulnerabilities and coordinate emergency deliveries, while permitting processes for extraction and refining will be streamlined to expedite project timelines. The framework also includes potential joint stockpiling arrangements and pledges to counter foreign trade distortions language widely interpreted as referring to Chinese market practices.
The technical challenge is daunting: the separation of rare earths involves complex processes such as solvent extraction, ion exchange, and thermal cracking, with operations that often produce radioactive waste requiring strict environmental controls. Chinese dominance is linked not just to resource availability but also to its integrated refining capacity and lower cost of production, partly facilitated by more relaxed environmental regulations. As analysts point out, reproducing these in the US, Japan, or Australia requires far higher capital investment and adherence to more rigorous environmental laws, involving access to specialized technical skills-which can extend development times to many years.
Japan plays a very significant role in this alliance. In addition to the pledge of investment worth $550 billion in the US economy, Tokyo brings advanced materials science capabilities in magnet manufacturing and recycling technologies. Japanese firms spearheaded the optimization of solvent extraction and closed-loop recycling of rare earth magnets from end-of-life electronics that reduce the virgin material requirement of the process. These could partly make up for the environmental and cost disadvantages of non-Chinese production.
For the US, the deal complements similar arrangements with Australia, Malaysia, Thailand, Vietnam, and Cambodia-all of which are designed to diversify access to rare earths and lock in supply commitments. Geologically rich deposits in Australia are already being used to develop new refining capacity, but projects such as the Iluka Resources refinery remain several years from full operation. The US currently has only one operational rare earth mine, Mountain Pass in California, which still ships material to China for processing-a testament to the chasm in its domestic refining infrastructure.
The strategic stakes are high. Rare earths underpin critical defense technologies, from radar systems and missile guidance to jet engines. They are also essential for the clean energy transition, embedded in offshore wind turbines, EV drivetrains, and grid-scale batteries. Supply disruptions can stall manufacturing lines and compromise national security. The agreement’s emphasis on stockpiling and rapid response reflects lessons from both the 2010 Japanese crisis and recent Chinese export curbs that added new elements to its control list and tightened oversight of foreign producers.
The economic context is complex, too. Still, with the US imposing a tariff rate of 15% against Japan and South Korea, compared to other countries, the increase from near zero has pressured exporters. Exports from Japan to the US have fallen for the sixth month in a row, forcing its manufacturers to cut prices to retain market shares–at the expense of profits. Above all, massive investment pledges totaling $550 billion from Japan and $350 billion from South Korea have been criticized at home as overly burdensome, likened even to economic coercion.
The rare earth pact thus sits at the intersection of geopolitics, trade policy, and industrial engineering. It is as much about securing physical supply as it is about reshaping the technological and economic architecture that underpins modern manufacturing. By binding two of the world’s largest economies into a coordinated strategy, the US and Japan are signaling that control over these obscure elements is now a core pillar of their alliance and a front line in the broader contest with Beijing.
