The DRI International Future Vision Committee has released its 11th Annual Predictions Report, looking ahead to 2026 and its impact on the resilience community. Download the complete report free from the DRI Library, and read on for analysis of how rare earth mineral dominance will affect manufacturing.

Prediction 2: China – U.S. relations will further deteriorate as China consolidates its control over rare earth minerals.

The U.S.’ relationship with China has been challenging for several years. There is a temporary truce on tariffs, but other contentious issues are likely to come to the fore in 2026.

China dominates the production and reserves of rare earth minerals, controlling over 70% of global rare earth mining. China holds about 37% of the world’s known rare earth element reserves, which are essential for various high-tech applications, including electric vehicles, smartphones, and defense systems. Additionally, China – the world’s top carbon polluter responsible for 28% of global emissions – has invested heavily in renewable energy power. It has become the global leader in wind, solar, and electric vehicles, while also dominating the refining and production of critical minerals crucial for clean energy technologies and needed by competitive countries.

The impact of this has not been fully felt in the U.S., as many manufacturers had stockpiled materials, but those stockpiles are being reduced. China’s restrictions, if they continue, could adversely impact all industrial manufacturing both in the U.S. and in all other countries with a strong manufacturing base.

China has built a near–total monopoly over the global rare-earth supply chain, from refining to high-strength magnet production. Today, Chinese facilities handle roughly 90% of the world’s rare-earth separation and processing, and manufacture around 85–90% of permanent rare-earth magnets – giving Beijing outsized influence over supply chains for defense, electronics and green energy

This dominance stems from decades of sustained state investment in processing infrastructure and technical expertise, as advanced economies largely off-loaded the complex and environmentally costly separation work. As a result, rebuilding a comparable rare-earth processing capacity outside China in an area such as the U.S. will likely take many years, given the deep technical know-how, extensive environmental permitting, and construction of chemical plants.

The automotive industry is another which has the potential to be hit hard by the introduction of licenses for the supply of rare earth metals. After China suspended exports of rare metals in April with the introduction of the licensing system, the supply chains of some manufacturing subsectors such as automobile manufacturers, aerospace manufacturers, semiconductor makers, and military equipment manufacturers have been hit hard. In the automotive sector, plants have been forced to close.

However, while this might suggest a downturn in production in 2026 for manufacturers dependent on these rare elements, the suspension is also testing the resilience strategies of organizations with large manufacturers already using mitigation strategies. Currently, 94% of traction motors use magnet-based technology, but companies such as General Motors and BMW are leading the way in researching and developing motors using externally-excited synchronous motors (EESM) which use copper wires rather than magnets, while Mercedes-Benz is in talks with suppliers about stockpiling. Both North America and India are also considering domestic extraction and production of rare earth minerals to counter the drought of materials from China.

While China shutting down global access to its rare earth metals is clearly a far from ideal situation, companies are taking it upon themselves in being proactive in reducing dependence on China, redefining their manufacturing processes, and ensuring a deep understanding of their supply chains.