U.S. Faces Critical Rare Earth Shortages Amid China Trade Tensions

U.S. aerospace and semiconductor industries are experiencing significant shortages of rare earth elements, particularly yttrium and scandium, which are essential for advanced manufacturing and defense technologies. These shortages have intensified despite a temporary easing of trade tensions between the United States and China, following a summit between President Donald Trump and Chinese President Xi Jinping scheduled for March 2026.

ReutersRare Earth Squeeze Deepens for U.S. Aerospace and ChipmakersChipmakers still suffering from rare earth shortages, says report — US-China trade truce apparently still hasn’t eased pressures despite agreement taking place in October last yearInvestor's Business DailyBreaking Defense

The shortages stem from China's dominance in the production of rare earth elements, which play crucial roles in various applications, including jet engines and semiconductor manufacturing. Following export restrictions imposed by China in April 2025, shipments of yttrium to the U.S. plummeted from 333 tons to just 17 tons over eight months. Prices for yttrium have surged approximately 60%, reaching levels nearly 70 times higher than a year ago. This has led to rationing by coatings manufacturers, with some firms pausing production to conserve supplies for larger clients.

ReutersRare Earth Squeeze Deepens for U.S. Aerospace and ChipmakersChipmakers still suffering from rare earth shortages, says report — US-China trade truce apparently still hasn’t eased pressures despite agreement taking place in October last yearInvestor's Business DailyBreaking Defense

In the semiconductor sector, scandium shortages are raising alarms about potential disruptions to the production of next-generation 5G chips. U.S. chipmakers have faced delays in obtaining export licenses from China, which are now required to declare end-users, complicating the supply chain further. The U.S. currently has no domestic production of scandium and lacks operational alternative sources outside China.

Rare Earth Squeeze Deepens for U.S. Aerospace and Chipmakers

The White House has committed to ensuring access to critical minerals through negotiations with China while also developing alternative supply chains. A U.S. government official noted, "Our thesis is that it is precisely the semi industry being targeted," highlighting concerns over the strategic implications of China's control over these materials.

Rare Earth Squeeze Deepens for U.S. Aerospace and Chipmakers

Senate Democrats have raised questions regarding the Pentagon's equity deal with MP Materials, aimed at bolstering the rare earth supply chain. Concerns include the legality and financial terms of the arrangement, with Senator Jack Reed stating, "The legal basis, in particular, appears questionable." Critics argue that such government investments may create competitive disadvantages for other domestic companies.

Breaking Defense

While some reports indicate that the shortages have not yet disrupted jet engine production, industry insiders express concern about the precariousness of the situation. The extent of the impact on production lines remains uncertain, with some companies already turning away smaller clients to prioritize larger ones.

Rare Earth Squeeze Deepens for U.S. Aerospace and Chipmakers

The upcoming summit between Trump and Xi is expected to address the ongoing trade issues surrounding rare earth exports. The outcomes of these discussions could significantly influence U.S.-China economic relations and the future of critical mineral supply chains.

Rare Earth Squeeze Deepens for U.S. Aerospace and Chipmakers

• “This is a watch item and a tangible example of how China is flexing its rare earth muscle,” — Kevin Michaels, Aerospace Supply Chain Specialist

Reuters

• “Notably, the United States currently has no domestic production of scandium and lacks fully operational alternative supply sources outside China.” — Dylan Patel, CEO of SemiAnalysis

Rare Earth Squeeze Deepens for U.S. Aerospace and Chipmakers

• “The legal basis, in particular, appears questionable.” — Senator Jack Reed, Senate Armed Services Committee

Breaking Defense

• “Our thesis is that it is precisely the semi industry being targeted.” — U.S. Government Official

Chipmakers still suffering from rare earth shortages, says report — US-China trade truce apparently still hasn’t eased pressures despite agreement taking place in October last year

The current rare earth shortages underscore the vulnerabilities in U.S. industries that are critical to national security and technological competitiveness, highlighting the need for strategic planning and diversification of supply sources.

Rare Earth Squeeze Deepens for U.S. Aerospace and Chipmakers