This study examines whether a dynamic causal relationship exists between U.S.–China tensions (RUCT) and rare earth prices (RREPI). Employing a bootstrap rolling-window causality test on monthly data from June 2014 to January 2026, we find a significant time-varying relationship. U.S.–China tensions significantly increased rare earth prices during three periods: August–October 2022, and December 2025–January 2026. Conversely, rare earth prices exerted a weak intensifying effect on tensions during July–September 2023, July–September 2024, and September–November 2025. The analysis indicates that technological sanctions, export controls, and geopolitical conflicts raise prices, while escalating trade frictions suppress them by weakening global demand. These findings suggest rare earths have transitioned from commodities into “geopolitical risk assets”, carrying a strategic rivalry premium. A bidirectional, asymmetric feedback mechanism exists between their prices and bilateral relations. The study provides dynamic evidence on strategic resources in great-power competition and offers insights for building resource security and early-warning systems.
- Open Access
- Article
Barometer of Great-Power Rivalry: Bidirectional Dynamic Causality between US–China Tensions and Rare Earth Prices
Author Information
Received: 28 May 2026 | Revised: 06 Jul 2026 | Accepted: 27 Jul 2026 | Published: 12 Aug 2026
Abstract
Keywords
U.S.–China tensions | rare earth prices | geopolitical risk | bootstrap rolling-window causality test
References
- 1.
Wang, Z.; Zeng, J. From Economic Cooperation to Strategic Competition: Understanding the US-China Trade Disputes through the Transformed Relations. J. Chin. Polit. Sci. 2020, 25, 49–69. https://doi.org/10.1007/s11366-020-09652-0.
- 2.
Song, X.Y.; Su, C.W.; Qin, M. Geopolitical Storm Approaches: Can Defence Stocks Serve as a Safe Haven? Def. Peace Econ. 2025, 37, 505–530. https://doi.org/10.1080/10242694.2025.2573012.
- 3.
Zhao, T.-Y.; Li, W.-L.; Kelebek, S.; et al. A Comprehensive Review on Rare Earth Elements: Resources, Technologies, Applications, and Prospects. Rare Met. 2025, 44, 7011–7040. https://doi.org/10.1007/s12598-025-03459-9.
- 4.
Depraiter, L.; Goutte, S.; Porcher, T. Geopolitical Risk and the Global Supply of Rare Earth Permanent Magnets: Insights from China’s Export Trends. Energy Econ. 2025, 146, 108496. https://doi.org/10.1016/j.eneco.2025.108496.
- 5.
Caldara, D.; Iacoviello, M. Measuring Geopolitical Risk. Am. Econ. Rev. 2022, 112, 1194–1225. https://doi.org/10.1257/aer.20191823.
- 6.
Liu, J.; Ma, F.; Tang, Y.; et al. Geopolitical Risk and Oil Volatility: A New Insight. Energy Econ. 2019, 84, 104548. https://doi.org/10.1016/j.eneco.2019.104548.
- 7.
Qian, L.; Zeng, Q.; Li, T. Geopolitical Risk and Oil Price Volatility: Evidence from Markov-Switching Model. Int. Rev. Econ. Financ. 2022, 81, 29–38. https://doi.org/10.1016/j.iref.2022.05.002.
- 8.
Khan, K.; Su, C.-W.; Tao, R.; et al. How Do Geopolitical Risks Affect Oil Prices and Freight Rates? Ocean Coast. Manag. 2021, 215, 105955. https://doi.org/10.1016/j.ocecoaman.2021.105955.
- 9.
Monge, M.; Rojo, M.F.R.; Gil-Alana, L.A. The Impact of Geopolitical Risk on the Behavior of Oil Prices and Freight Rates. Energy 2023, 269, 126779. https://doi.org/10.1016/j.energy.2023.126779.
- 10.
Hudecová, K.; Rajčániová, M. The Impact of Geopolitical Risk on Agricultural Commodity Prices. Agric. Econ. 2023, 69, 129–139. https://doi.org/10.17221/374/2022-AGRICECON.
- 11.
Ren, X.; An, Y.; Jin, C. The Asymmetric Effect of Geopolitical Risk on China’s Crude Oil Prices: New Evidence from a QARDL Approach. Financ. Res. Lett. 2023, 53, 103637. https://doi.org/10.1016/j.frl.2023.103637.
- 12.
Mo, B.; Nie, H.; Zhao, R. Dynamic Nonlinear Effects of Geopolitical Risks on Commodities: Fresh Evidence from Quantile Methods. Energy 2024, 288, 129759. https://doi.org/10.1016/j.energy.2023.129759.
- 13.
Zhou, H.; Liang, C. Geopolitical Risk and Gold Price Bubbles. Rev. Account. Financ. 2025, 24, 353–374. https://doi.org/10.1108/RAF-09-2024-0369.
- 14.
Wang, E. Engagement or Containment? Americans’ Views on China and Sino-US Relations. J. Contemp. China 2002, 11, 381–392. https://doi.org/10.1080/10670560220129676.
- 15.
Polachek, S.W.; Seiglie, C. Trade, Peace and Democracy: An Analysis of Dyadic Dispute. Handb. Def. Econ. 2007, 2, 1017–1073. https://doi.org/10.1016/S1574-0013(06)02031-X.
- 16.
Song, Y.; Chen, B.; Hou, N. Trade Dependence, Uncertainty Expectations, and Sino–US Political Relations. J. Chin. Polit. Sci. 2024, 29, 109–131. https://doi.org/10.1007/s11366-022-09829-9.
- 17.
Handley, K.; Limão, N. Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States. Am. Econ. Rev. 2017, 107, 2731–2783. https://doi.org/10.1257/aer.20141419.
- 18.
Crowley, M.; Exton, O.; Han, L. Renegotiation of Trade Agreements and Firm Exporting Decisions: Evidence from the Impact of Brexit on UK Exports. In Proceedings of the Society of International Economic Law (SIEL), Sixth Biennial Global Conference, Washington, DC, USA, 12–14 July 2018.
- 19.
Pástor, Ľ.; Veronesi, P. Political Uncertainty and Risk Premia. J. Financ. Econ. 2013, 110, 520–545. https://doi.org/10.1016/j.jfineco.2013.08.007.
- 20.
Baker, S.R.; Bloom, N.; Davis, D.J. Measuring Economic Policy Uncertainty. Q. J. Econ. 2016, 131, 1593–1636. https://doi.org/10.1093/qje/qjw024.
- 21.
Wang, C.; Chen, B.; Song, Y.; et al. Sino–US Relations, Climate Policy Uncertainty and Rare Earth Prices. Energy 2025, 327, 136388. https://doi.org/10.1016/j.energy.2025.136388.
- 22.
Chapman, B. The Geopolitics of Rare Earth Elements: Emerging Challenge for US National Security and Economics. J. Self-Gov. Manag. Econ. 2018, 6, 50–91. https://doi.org/10.22381/JSME6220182.
- 23.
Fan, J.H.; Omura, A.; Roca, E. Geopolitics and Rare Earth Metals. Eur. J. Polit. Econ. 2023, 78, 102356. https://doi.org/10.1016/j.ejpoleco.2022.102356.
- 24.
Li, Z.-Z.; Meng, Q.; Zhang, L.; et al. How Do Rare Earth Prices Respond to Economic and Geopolitical Factors? Resour. Policy 2023, 85, 103853. https://doi.org/10.1016/j.resourpol.2023.103853.
- 25.
Klossek, P.; Kullik, J.; van den Boogaart, K.G. A Systemic Approach to the Problems of the Rare Earth Market. Resour. Policy 2016, 50, 131–140. https://doi.org/10.1016/j.resourpol.2016.09.005.
- 26.
Chen, W.-Q.; Eckelman, M.J.; Sprecher, B.; et al. Interdependence in Rare Earth Element Supply between China and the United States Helps Stabilize Global Supply Chains. One Earth 2024, 7, 242–252. https://doi.org/10.1016/j.oneear.2024.01.011.
- 27.
Fama, E.F.; French, K.R. The Capital Asset Pricing Model: Theory and Evidence. J. Econ. Perspect. 2004, 18, 25–46. https://doi.org/10.1257/0895330042162430.
- 28.
Bekaert, G.; Engstrom, E.; Xing, Y. Risk, Uncertainty, and Asset Prices. J. Financ. Econ. 2009, 91, 59–82. https://doi.org/10.1016/j.jfineco.2008.01.005.
- 29.
Bianchi, F.; Ilut, C.L.; Schneider, M. Uncertainty Shocks, Asset Supply and Pricing over the Business Cycle. Rev. Econ. Stud. 2018, 85, 810–854. https://doi.org/10.1093/restud/rdx035.
- 30.
Müller, M.A.; Schweizer, D.; Seiler, V. Wealth Effects of Rare Earth Prices and China’s Rare Earth Elements Policy. J. Bus. Ethics 2016, 138, 627–648. https://doi.org/10.1007/s10551-015-2773-3.
- 31.
Chang, Y.-M.; Sellak, M. A Game-Theoretic Analysis of International Trade and Political Conflict over External Territories. Public Choice 2019, 179, 209–228. https://doi.org/10.1007/s11127-018-0505-9.
- 32.
Yuzhou, S.; Ruthann, M.; Eggert, R.G. China’s Public Policies toward Rare Earths, 1975–2018. Miner. Econ. 2020, 33, 127–151. https://doi.org/10.1007/s13563-019-00214-2.
- 33.
Nyblom, J. Testing for the Constancy of Parameters over Time. J. Am. Stat. Assoc. 1989, 84, 223–230. https://doi.org/10.1080/01621459.1989.10478759.
- 34.
Hansen, B.E. Tests for Parameter Instability in Regressions with I(1) Processes. J. Bus. Econ. Stat. 1992, 10, 321–335. https://doi.org/10.2307/1391545.
- 35.
Balcilar, M.; Gupta, R.; Kyei, C.; et al. Does Economic Policy Uncertainty Predict Exchange Rate Returns and Volatility? Evidence from a Nonparametric Causality-in-Quantiles Test. Open Econ. Rev. 2016, 27, 229–250. https://doi.org/10.1007/s11079-016-9388-x.
- 36.
Su, C.W.; Song, X.Y.; Dou, J.; et al. Fossil Fuels or Renewable Energy? The Dilemma of Climate Policy Choices. Renew. Energy 2025, 238, 121950. https://doi.org/10.1016/j.renene.2024.121950.
- 37.
Qin, M.; Wan, Y.; Dou, J.; et al. Artificial Intelligence: Intensifying or Mitigating Unemployment? Technol. Soc. 2024, 79, 102755. https://doi.org/10.1016/j.techsoc.2024.102755.
- 38.
Pesaran, M.H.; Timmermann, A. Small Sample Properties of Forecasts from Autoregressive Models under Structural Breaks. J. Econom. 2005, 129, 183–217. https://doi.org/10.1016/j.jeconom.2004.09.007.
- 39.
Rogers, J.H.; Sun, B.; Sun, T. US-China Tension. 2024. Available online: https://ssrn.com/abstract=4815838 (accessed on 19 May 2026).
- 40.
Su, C.-W.; Qin, M.; Zhang, X.-L.; et al. Should Bitcoin Be Held under the US Partisan Conflict? Technol. Econ. Dev. Econ. 2021, 27, 511–529. https://doi.org/10.3846/TEDE.2021.14058.
- 41.
Su, C.-W.; Liu, Y.; Chang, T.; et al. Can Gold Hedge the Risk of Fear Sentiments? Technol. Econ. Dev. Econ. 2023, 29, 23–44. https://doi.org/10.3846/tede.2022.17302.
- 42.
Sun, Y.; Song, Y.; Long, C.; et al. How to Improve Global Environmental Governance? Lessons Learned from Climate Risk and Climate Policy Uncertainty. Econ. Anal. Policy 2023, 80, 1666–1676. https://doi.org/10.1016/j.eap.2023.11.010.
- 43.
Zeileis, A.; Leisch, F.; Kleiber, C.; et al. Monitoring Structural Change in Dynamic Econometric Models. J. Appl. Econom. 2005, 20, 99–121. https://doi.org/10.1002/jae.776.
- 44.
Andrews, D.W. Tests for Parameter Instability and Structural Change with Unknown Change Point. Econometrica 1993, 61, 821–856. https://doi.org/10.2307/2951764.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Suite 4002 Level 4, 447 Collins Street, Melbourne, Victoria 3000, Australia
General Inquiries: info@sciltp.com