The critical minerals war

The China-US Trade War began in the Trump's first term. Since then, weaponisation of critical minerals and rare earth elements has been a central economic battlefield. China used export restrictions and technology bans to leverage its dominant supply chain position, while the US focused on stockpiling, domestic production incentives and restrictions on Chinese components.

In 2023, China banned the export of rare earth mining, separation, refining and magnet-making technologies to all foreign countries, explicitly targeting Japan, Australia and Vietnam, so they are unable to use Chinese intellectual property to build alternative supply chains for the US. Late 2023, US manufacturers moved manufacturing to Mexico, Vietnam and Malaysia. But China introduced strict end-user certificates for raw graphite, gallium and germanium, defeating USA's 'friendshoring' plan. In 2024, China used its Dual-Use Export Control Regulations to warn tech suppliers in South Korea and Japan that re-exporting components containing Chinese-origin gallium, germanium or antimony to US defence contractors would trigger retaliatory blacklisting. Late 2025, China implemented Extraterritorial Jurisdiction, asserting that any company in a third country, like Germany, Japan or South Korea, exporting components to the US that contain 0.1% or more of key Chinese heavy rare earths like dysprosium or terbium required direct export licences from Beijing.

In return, between 2019 and 2023, US DoD partnered with Australia to process heavy rare earths domestically and in Texas, explicitly cutting out Chinese refining loops. Next, the US restricted tax credits for electric vehicles that sourced battery minerals, lithium, cobalt and graphite from China. Since 2022, the US has pressured Indonesia to restrict Chinese ownership shares in nickel refineries and asked them to impose strict forced labour bans and transparency rules on China. In Democratic Republic of Congo and Zambia, the US has aggressively bid against Chinese state-owned enterprises for critical mineral concessions in cobalt and copper. In 2024, the US signed bilateral critical mineral agreements with Kazakhstan and Uzbekistan for Western mining investments, offering security guarantees and capital to counter Chinese market dominance in titanium, tungsten and rare earths.

In the case of Indonesia, to protect proprietary chemical configurations and decades of catalyst tech from leaking to Western supply chains, leading Chinese firms took the drastic step of completely dismantling multi-billion-dollar production lines in Indonesia and shipping the machinery back to China. This forced a sharp contraction in global battery-grade nickel supply, flipping a massive market surplus into a calculated shortage. Agreements with Kazakhstan and Uzbekistan are also in limbo, as China is the single largest trading partner for all five Central Asian states. Beijing routinely pairs infrastructure investments with security guarantees to ensure that Central Asian states remain tightly bound to Chinese processing networks. Getting bulk minerals out of Central Asia to Western markets without crossing Russian or Chinese aligned territory or infrastructure is also a bottleneck.

The most difficult part of processing rare earths is separating virtually identical elements from one another using complex, multi-stage liquid-liquid solvent extraction. China has spent decades perfecting these chemical recipes at an industrial scale. The US, Europe, Japan and Australia do produce world class extraction and mining equipment; however, China holds a near-monopoly on specific metallurgical refining technologies and specialised chemical separation intellectual property - particularly for heavy rare earths.

All this trade war has negatively affected Western and US industries. The US cannot produce precision weapons, munitions, jet engines, airframes, sensors and night-visions without them. Wind turbines, solar panels, EVs and battery manufacturing are facing a standstill. Shortages in semiconductors, chips and circuit components has effectively turned a booming AI industry into a bubble. This is a war between the Global North and the Global South, a war between the G7 and BRICS. And China is winning it without firing a bullet.

When Pakistan talks with the US about a potential $1 trillion to $6 trillion worth of minerals, how does that sit within the context of the bigger picture? Antimony, neodymium, praseodymium, dysprosium and terbium are used in the defence industry, high-strength permanent magnets and EV motors; cobalt and graphite in lithium-ion batteries; titanium and tungsten in defence manufacturing; and copper concentrate in power grids, data centres, EVs and AI hardware – all of which are present in K-P and Balochistan. So, which side of the decoupling equation do they sit on?

Pakistan is deeply entrenched in China's security architecture. Pakistan's success over India in Operation Sindoor last year and its growing strategic role in the region based on the strength it gains from its alliance with China only mean that Pakistan is increasingly becoming an integral part of the Global South, not the Global North. Pakistan's membership request in BRICS, and CPEC being a flagship projects of China's BRI, mean that the country is part of the Global South, not the Global North. Being on this side of the equation is not just a matter of luxury for Pakistan but a question of its survival in the violent global environment of today.

It is understandable for China to be happy about the US gaining a major inroad into rare earths and critical minerals on allied soil. Minerals worth $6 trillion have the potential to shift the balance for China, which has dominated the supply chain until now.

One wonders why China might not deploy asymmetric, highly targeted pressure points to slow down, render unviable, or structurally block the flow of Pakistani minerals to the US, and why it would not demand enhanced protection for Chinese-led projects in Balochistan and K-P making it operationally and financially burdensome for Pakistan to secure parallel US mining ventures in the same regions. It is logical for Beijing to seek explicit guarantees from Islamabad that US geological survey teams and mining entities operate far away from sensitive assets under construction, dual-use ports, and strategic CPEC transit corridors. It may even leverage debt restructuring timelines or future CPEC Phase-II investments to exert diplomatic pressure on Islamabad.

Pakistan would need to rethink this rebalance, which virtually means making the country a new battleground for the two global powers. Or perhaps our strategists know that it's all talk and no walk!