Is this what is happening and how does this affect the US Economy?
Is China effectively selling rare earth minerals to the United States and ultimately ending up with gold through global markets such as Switzerland? The reality is more nuanced.
The United States does not pay China directly in physical gold for rare earth minerals. Instead, what is happening is a two-step economic dynamic that some analysts associate with China’s broader strategy of diversifying away from heavy dependence on the US dollar.
The trade mechanism
First, the United States imports rare earth elements from China and pays for them in US dollars (USD). China dominates the global rare earth supply chain, controlling a large share of both mining and processing capacity. According to research published by Visual Capitalist, China holds a commanding position in the global rare earth metals market, giving it significant influence over critical supply chains used in technology and defense industries [1].
Because the US purchases large quantities of these materials, the transactions contribute to China’s large trade surplus with the United States.
The “gold pivot”
Rather than holding all of those dollars indefinitely, China reallocates a portion of its foreign exchange reserves into other assets, including gold.
China’s central bank has steadily increased its gold holdings in recent years, purchasing gold in global markets and often using major refining hubs such as Switzerland. Analysts describe this strategy as part of a broader diversification of reserves and a gradual move away from reliance on the US dollar [3].
While this does not mean the US directly pays China in gold, the sequence of earning dollars through trade and later converting some reserves into gold has led some observers to informally describe the process as a “gold pivot.”
Impact on the US economy
When major economies reduce their reliance on the US dollar and diversify into assets such as gold, it contributes to a long-term trend often referred to as de-dollarization.
Although the dollar remains the world’s dominant reserve currency, continued diversification by large economies could gradually weaken global demand for dollars and potentially raise borrowing costs for the United States over time.
Supply chain vulnerability
A more immediate concern for policymakers is the United States’ heavy dependence on China for rare earth minerals.
These elements are crucial for modern technologies and national security applications, including advanced defense systems such as the F-35 fighter jet, as well as electronics, electric vehicles, and renewable energy technologies.
A report by CBS’s 60 Minutes highlighted how the US government has begun investing heavily in domestic rare earth mining and processing in an effort to counter China’s dominance in the sector [2].
Research from the Council on Foreign Relations also emphasizes that the United States and its allies must develop alternative supply chains to reduce reliance on China’s control of critical minerals [4].
Efforts to rebuild domestic production
In response to these vulnerabilities, the United States has begun investing billions of dollars to rebuild its rare earth supply chain.
Companies such as MP Materials, which operates the Mountain Pass rare earth mine in California, are expanding domestic mining and processing capacity with government support.
Industry analysts note that diversifying supply chains across allied countries will be essential for reducing strategic dependence on a single supplier [3].
References:
[1] Visualizing China’s Dominance in Rare Earth Metals – January 13, 2021, visualcapitalist.co
[2] The American rare earths company seeking to topple China’s dominance
[3] Critical Dependence on Rare-Earth Minerals – Nov 11, 2025 gqg.com
[4] Leapfrogging China’s Critical Minerals Dominance – February 2026, cfr.org
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