Context: In October 2025, China announced export curbs on 12 rare earth elements (REEs), escalating existing trade frictions with the United States. In response, the US imposed 100% tariffs on Chinese rare earth exports, effective November 1, 2025. These developments underscore the strategic importance of rare earths in critical supply chains spanning clean energy, defence, and advanced technologies.
About Rare Earth Elements
Rare Earth Elements (REEs) are a group of 17 elements, including 15 lanthanides plus scandium and yttrium. Although abundant in the Earth’s crust, they occur in low concentrations and are difficult to extract and process, making them strategically valuable.
- Types:
- Light Rare Earth Elements (LREEs) – more abundant (e.g. Neodymium)
- Heavy Rare Earth Elements (HREEs) – scarcer and more critical (e.g. Dysprosium, Yttrium)
- Applications: Widely used in EV motors, wind turbines, defence systems, electronics, and medical imaging equipment like MRI machines.
- Global Distribution:
- China: 61% of mining and 92% of processing (IEA 2024)
- India: 3rd largest reserves (~6%) but <2% production (USGS 2024)
Impact on India
- Supply Risk:
India imports nearly 90% of its rare earth compounds from China (DGFT 2024). Export restrictions could disrupt EV, semiconductor and defence supply chains, slowing key manufacturing sectors. - Rising Costs:
Tariffs and curbs are projected to increase input costs for electronics by 20–25% (IEA 2025), affecting both industry and consumers. - Strategic Opportunity:
With 6.9 million tonnes of REE reserves, India can expand domestic capacity through Indian Rare Earths Ltd (IREL) and the National Critical Minerals Mission (2023) to reduce import dependency. - Geopolitical Leverage:
India’s participation in the Quad Critical Minerals Partnership (2022) and the Indo-Pacific Economic Framework (IPEF) can help diversify global supply chains and strengthen strategic ties.
Global Consequences
- Supply Chain Disruptions:
China’s dominance in processing (92%) makes global supply chains vulnerable to shocks. - Price Surge:
Following the export curbs, global rare earth prices surged by 35–40% (IEA Market Update, Sept 2025), affecting clean energy and defence manufacturing worldwide. - Strategic Decoupling:
The US, EU, and Japan are accelerating friend-shoring — relocating supply chains to trusted partners like Australia, Vietnam, and African nations under the Minerals Security Partnership (MSP). - Environmental Challenges:
Expansion of new mining hubs in regions such as Congo and Myanmar may lead to ecological degradation if not regulated under sustainable frameworks.
Way Forward
- Diversification of Supply: Strengthen partnerships with Australia, Vietnam, and African nations under MSP to reduce reliance on China.
- Sustainable Mining: Promote ESG-based standards through UNEP’s Global Mineral Governance Framework to ensure minimal environmental impact.
- Strategic Stockpiles: Create rare earth reserves under the G7 Critical Minerals Agreement to stabilize supply and prices.
- Recycling and Circular Economy: Expand e-waste recovery networks, similar to Japan’s Urban Mining Model, to recover key elements like neodymium and dysprosium from end-of-life electronics.