Why Vietnam Is Emerging as the West's Rare Earth Alternative to China

Vietnam's Rare Earth Position and the Dong Pao Plan

Vietnam is the world's second-largest holder of rare earth reserves, with about 22 million tonnes of the 130 million tonnes known globally, according to the US Geological Survey cited by Forbes Italia. That puts Hanoi in a strategically valuable position as Washington and its allies try to reduce dependence on China, which currently accounts for roughly 60% of global rare earth extraction and 90% of refining.

The gap between potential and output is stark. China processes about 240,000 tonnes a year, while Vietnam currently processes only slightly more than 4,000 tonnes. Vietnam's government has set a target of extracting 2 million tonnes per year from the Dong Pao mining site by 2030, aiming to become an alternative supplier for permanent magnets, a market in which China holds about 92% of global production.

The United States imports almost 70% of its rare earths from China and, together with Australia, South Korea and Japan, sees Vietnam as a less burdensome and non-hostile supplier. In 2025, Washington initially threatened tariffs of up to 46% on Vietnam, before the two sides agreed to 20% tariffs on Vietnamese exports and zero tariffs on US imports into Vietnam.

The constraint is political as much as technical. China is Vietnam's largest export market: Vietnam supplies 22.5% of China's fruit and vegetable imports, worth about $5.5 billion, and bilateral trade reached $290 billion in 2025, then grew another 37% in the first quarter of 2026. Hanoi's "bamboo strategy" aims to keep ideological roots firm while bending commercially toward whichever partner offers the best path to high-income status by 2045.

Why a Vietnam Rare Earth Hub Is Harder Than the Reserve Numbers Suggest

Where China's Real Leverage Sits

The reserve figure is only part of the story. Rare earths are difficult and expensive to move from ore to usable product, and the article notes Vietnam's shortage of human capital and engineering skills. As long as China refines about 240,000 tonnes a year against Vietnam's roughly 4,000 tonnes, Beijing controls the steps that determine price, purity and magnet supply. Vietnam's 2030 target is therefore a capacity ambition, not yet a credible alternative.

What the US–Vietnam Tariff Stand-down Signaled

Washington's threatened 46% tariff in April 2025 and the later 20%-zero agreement show that rare earths did not override broader trade politics. But the deal matters for Hanoi's rare earth plan because US capital, engineering support and buyer commitments are the largest realistic source of investment for a non-Chinese supply chain. Without them, Vietnam cannot finance the leap from 4,000 to 2 million tonnes.

The Bamboo Strategy Has a China-Shaped Ceiling

Vietnam cannot treat rare earths as a purely Western project. China is the principal market for Vietnamese agricultural, fishery and forestry exports; Vietnam supplies 22.5% of China's fruit and vegetable import market, worth about $5.5 billion. Bilateral trade reached $290 billion in 2025 and accelerated 37% in Q1 2026. Aggressive alignment with Washington on rare earths could put those flows at risk, while too much Chinese involvement would defeat the diversification Western buyers want.

Two Risks the Supply Chain Math Ignores

The article identifies separate vulnerabilities. Vietnam is highly exposed to typhoons, sea-level rise and saltwater intrusion in the Mekong, and rare earth mining could worsen the environmental picture. Hanoi also imports 86% of its oil from Kuwait, making it vulnerable to disruptions in the Gulf and the Strait of Hormuz. Those pressures could complicate the financing and physical development of mining and processing infrastructure.

Where the US, Investors and Vietnam Go from Here

The strategic direction is clear, but the operational timeline is not. The following next steps follow from the data in the article.

• For rare earth buyers in the US, Japan, South Korea and Australia: treat Vietnam's 2030 target of 2 million tonnes from Dong Pao as a capacity signal, not a procurement plan. Current Vietnamese processing is just over 4,000 tonnes a year, so offtake agreements should be tied to verified refining milestones and environmental safeguards.
• For Western governments and development finance institutions: the binding constraint is not Vietnam's 22 million tonnes of reserves but its shortage of engineering skills and capital. Funding should target training and processing technology, not only extraction, if the aim is to reduce the 70% US import dependence on China.
• For investors in Vietnam's supply chain: price the political balance explicitly. Vietnam sells 22.5% of China's imported fruit and vegetables, a roughly $5.5 billion market, and bilateral trade reached $290 billion in 2025. A rare earth project aligned too heavily with Washington could provoke Beijing retaliation that risks those flows.
• For Vietnamese policy makers: pair rare earth expansion with climate and energy planning. The article notes typhoon exposure, Mekong saltwater intrusion and 86% oil import dependence on Kuwait; if these are not addressed, infrastructure reliability and environmental opposition could stall the same projects meant to lift Vietnam to high-income status by 2045.
• For manufacturers of permanent magnets and EVs: maintain dual sourcing because China still controls about 92% of permanent magnet production. Vietnam is a credible future hedge, not a short-term substitute.