As the US seeks to reduce its dependence on China for critical minerals, it may find a useful blueprint in Japan’s playbook. Further restrictions on rare earth trade are likely to put US manufacturing in a bind, but Japan’s decade-long strategy of diversification offers key lessons for building long-term resilience.
China has cemented its position as the dominant supplier of rare earths, a group of 17 critical elements essential for semiconductors, electric vehicles, and defence systems. The country's share of global trade (including permanent magnets) rose to 63.2 percent in 2023, up from 56.6 percent in 2012, according to UN COMTRADE data analysed by Moneycontrol.
Japan’s Diversification PlaybookAfter its 2010 rare earth crisis, triggered by a diplomatic dispute with Beijing, Japan embarked on an aggressive diversification drive. Tokyo secured alternative supplies from Australia, Vietnam, and India, while simultaneously building domestic recycling capacity and strategic stockpiles.
The results are visible. China’s share in Japan’s total rare earth trade — spanning both raw materials and final goods — has fallen from over 70 percent in 2012 to 68 percent in 2023, and even further to 44 percent for raw materials alone. Vietnam now rivals China as Japan’s top supplier of rare earth elements.
US Dependence Deepens
By contrast, the US has become significantly more reliant on China. Nearly 80 percent of America’s rare earth and permanent magnet imports now come from China, up from just 16 percent in 2012, one of the steepest increases among major economies.
In 2024, the US imported $175 million worth of rare earth materials and compounds, of which $119 million came from China. Japan, France, Austria, and South Africa remain minor suppliers, with only Japan accounting for more than a tenth of total imports.
A Global Pattern of Reliance
The US is not alone in its growing dependence. China now supplies 89 percent of South Korea’s rare earth imports, 79.7 percent of Germany’s, and 96.9 percent of India’s. For the UK, the figure stands at 87.5 percent.
China’s own export mix, however, is more balanced. The US accounts for roughly a quarter of China’s rare earth exports, while the EU takes 20 percent, Japan 44 percent, and South Korea 51 percent.
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