Beijing and Washington are both losing from the current chaos. Here’s the deal: they could both sign tomorrow.
The rare earth crisis has become a prime example of how both superpowers can inadvertently weaken themselves while claiming to strengthen their position. China continues to threaten export restrictions, which spook its top customers. America continues to threaten tariffs that drive up costs for its own manufacturers. Everyone loses.
But there’s a way out if both sides can stop posturing long enough to grab it.
The Problem with Current Approaches
Washington’s strategy of building alternative supply chains sounds promising until you realize it will take 15-20 years to seriously challenge Chinese dominance in rare earth processing. During that time, American manufacturers faced constant uncertainty about prices and availability. Every trade war flare-up threatens to shut down production lines from Detroit to Silicon Valley.
Beijing’s approach of using rare earth exports as a geopolitical weapon sounds powerful until Chinese companies realize they’re destroying their most profitable relationships. When your customers can’t plan investments because they’re unsure if you’ll cut them off, they start looking for alternatives, even if those alternatives are more expensive.
The current system serves nobody’s interests. Chinese exporters are losing market share due to uncertainty. American manufacturers can’t make long-term capital investments. Global supply chains are constantly lurching from crisis to crisis.
What Each Side Actually Needs
Strip away the rhetoric, and both sides have reasonable requirements.
China needs predictable, long-term demand from creditworthy buyers. Its rare earth industry has massive fixed costs that require steady offtake to justify continued investment. Chinese companies also want room to move up the value chain into higher-margin products, such as specialized alloys and permanent magnets.
America needs transparent, predictable access to rare earth materials at stable prices. U.S. manufacturers have to plan production schedules and capital investments months or years in advance. They can’t operate when a single tweet from Beijing can double their input costs overnight.
Both sides also need to save face domestically. Beijing can’t be seen as surrendering its “resource sovereignty.” Washington can’t be seen as remaining dependent on a strategic rival.
Here’s the thing: you can give each side what it needs without forcing either to surrender what it can’t give up.
The Deal That Works
Could you start with the licensing problem? Beijing maintains complete control over rare earth export licenses, with no foreign oversight, no external committees, and no indications of surrendering sovereignty. However, China publishes clear service standards, including target timelines for processing applications, required documentation, and appeal procedures. Just transparent administration.
In return, Washington implements a graduated tariff reduction schedule tied directly to whether those service standards are met. If licensing slows down measurably for a defined period, tariffs snap back automatically. No congressional hearings, no trade representative negotiations, just automatic enforcement based on objective metrics.
This provides China with regulatory certainty and tariff relief, while giving the US predictable access and instant leverage if things go sideways.
Next, tackle the price volatility that’s killing industrial planning on both sides. Private companies negotiate multi-year supply contracts with price bands tied to transparent global indices. When extraordinary events push prices outside the bands, both sides have a short window to renegotiate before any trade restrictions take effect.
Chinese suppliers get long-term revenue certainty. American buyers get planning stability. Both sides have relief valves for genuine emergencies, such as natural disasters or global economic shocks.
For the environmental and labor concerns that matter to American voters, create market incentives instead of inspection regimes. U.S. companies get import duty credits for rare earth materials that carry third-party environmental certifications. China chooses the certifying organizations from an agreed shortlist of internationally recognized auditors.
Beijing can sell this domestically by accessing premium markets through industrial upgrading. Washington can obtain a cleaner supply chain without having to police Chinese facilities. Chinese companies that invest in improving their environmental practices gain competitive advantages in the U.S. market.
To keep China engaged in global supply chains while America builds domestic capacity, allow limited Chinese minority investment in new U.S. rare earth projects. Sub-50% stakes with clear governance restrictions and technology protections. Chinese capital helps speed American capacity building. American oversight prevents the transfer of technology or operational control.
Finally, create automatic cooling-off periods before either side can impose new restrictions on covered rare earth trade. Forty-five days’ notice with senior-level consultation, not binding arbitration, just structured time for both sides to find commercial solutions before politics takes over.
Why This Actually Works
This approach works because it aligns incentives instead of fighting them. Chinese companies get the revenue predictability they need to justify continued investment in rare earth production. American manufacturers get the supply security they need for long-term planning. Both governments get political cover with their domestic audiences.
Most importantly, the automatic mechanisms reduce the role of day-to-day politics in trade relationships. When tariffs snap back or price bands trigger renegotiation based on objective criteria, it’s not about trust or goodwill; it’s about measurable performance.
Beijing can tell its people that China maintained complete sovereignty over export licensing while securing stable demand and premium market access. Washington can say to its voters that America has reduced critical vulnerabilities while maintaining its leverage and continuing its efforts at diversification.
Both stories are true. That’s why this can work.
The Bigger Picture
The rare earth crisis isn’t really about rare earths; it’s about whether two superpowers can find ways to compete without making themselves weaker in the process. Current approaches assume that one side must lose for the other to win. But when critical supply chains are involved, mutual damage often exceeds any strategic benefit.
A smart strategy means achieving wins that your rival can live with. The alternative, continued escalation toward complete economic decoupling, serves the interests of no one except those of third-country competitors, who are happy to watch both superpowers weaken themselves through self-inflicted trade wars.
This isn’t about trust or friendship between Washington and Beijing. It’s about creating practical arrangements that work better than the current chaos for both companies and their workers.
The mechanisms are straightforward. The benefits are measurable. The domestic political messaging writes itself. What’s missing isn’t technical solutions; it’s leaders willing to take ‘yes’ for an answer when it’s offered.
The question isn’t whether this approach is perfect. It’s whether it’s better than watching two significant economies damage themselves and everyone else through endless supply chain warfare.
The answer should be obvious.