Japan Capitulated, America Followed: Why Democracies Build Dependencies China Exploits Why democracies optimize for efficiency while autocracies build leverage
by Michael Lamonaca, 8 December 2025
In 2010, China restricted rare earth exports during a territorial dispute with Japan over contested islands, forcing Tokyo to back down within weeks. Fourteen years later, Beijing deployed the same weapon against Washington during trade negotiations, and the United States capitulated rather than face disruption to industries dependent on minerals China produces at 70% of global supply. This pattern reveals something structural about how democracies and autocracies approach economic vulnerability differently. Building resilient supply chains—maintaining redundant suppliers, producing strategic inputs domestically despite higher costs, accepting lower efficiency for autonomy—requires leaders willing to defend spending more today to prevent coercion tomorrow. Democratic electorates punish this. Voters see higher prices, opposition parties campaign on waste, media focuses on cost overruns. The institutional bias favors efficiency over resilience because benefits of optimization appear immediately while costs of vulnerability remain invisible until leverage gets exercised. Beijing faces different constraints. Consolidating control over rare earth production creates leverage usable across decades against dozens of nations simultaneously. Chinese leaders can accept short-term economic pain from restricting exports without facing electoral punishment, while Japanese or American leaders who built expensive domestic capacity would lose office before the resilience paid off. When Tokyo needed rare earths for electronics and defense in 2010, it had no alternatives and capitulated. When Washington needed them for everything from smartphones to missiles in 2024, it negotiated rather than endure supply disruption. The asymmetry isn’t just in resources—it’s in institutional willingness to accept cost. Democracies optimize for efficiency their voters demand. Autocracies build leverage their systems reward.
The architecture of rare earth dependency didn’t emerge through deliberate strategic planning by China or through democratic negligence—it resulted from decades of optimization decisions that made perfect economic sense at each decision point but accumulated into strategic vulnerability. Rare earth mining is environmentally destructive, requiring processing that generates toxic waste and radioactive byproducts. Democratic nations with environmental regulations and activist populations made rare earth extraction increasingly expensive and politically difficult through the 1990s and 2000s. China, facing fewer environmental constraints and operating through state-owned enterprises that could absorb losses for strategic purposes, increased production while others reduced it. American and Japanese companies didn’t choose Chinese suppliers because they were coerced—they chose them because Chinese rare earths cost less, arrived reliably, and freed them from environmental compliance burdens domestic production would require. Each purchasing decision optimized for quarterly earnings. The cumulative effect was supply chain consolidation that gave Beijing leverage over industries in dozens of nations. By 2010, when tensions over disputed islands escalated, Japan discovered that its electronics sector—representing substantial percentage of GDP—depended on inputs China could restrict with minimal economic pain to itself but catastrophic consequences for Tokyo. The restriction lasted weeks, but the message lasted years: economic relationships Japan understood as mutual trade, Beijing understood as strategic leverage waiting to be exercised. The United States watched Japan’s capitulation and learned nothing structurally applicable. American rare earth production continued declining not because policymakers wanted dependency but because voters punished higher costs and environmental groups opposed mining expansion. When 2024 trade tensions reached crisis point, Washington faced the same calculation Tokyo had fourteen years earlier—capitulate or accept supply disruption American industries couldn’t absorb.
The human dimension of rare earth coercion reveals how abstract strategic vulnerabilities translate into immediate pressure on individuals making decisions under constraint. When China announced export restrictions in 2010, Japanese electronics executives faced production timelines measured in weeks while alternative supply chains required years to establish. The CEO who chose to shut down production lines rather than accept Beijing’s terms would face shareholder revolts and potential dismissal before any domestic rare earth facility could come online. The rational individual decision was capitulation, even if the rational national decision was accepting short-term pain to eliminate long-term vulnerability. This dynamic repeated across sectors—defense contractors building missile guidance systems, automotive manufacturers producing hybrid vehicles, renewable energy companies making wind turbines and solar panels, all dependent on rare earth inputs they couldn’t quickly substitute. When Washington faced similar pressure in 2024, American executives made the same calculations Japanese counterparts had made: the timeline for building alternative supply exceeded the timeline for losing their jobs if production stopped. The Biden administration, facing electoral pressure and industry lobbying, chose negotiated settlement over supply disruption. The Chinese officials implementing export restrictions faced different incentives entirely. The short-term economic cost of reduced rare earth exports—lower revenue, idle capacity, disrupted customer relationships—mattered less than the long-term strategic gain of demonstrating leverage. No Chinese official would lose their position for accepting temporary economic pain that advanced national strategic objectives. The asymmetry isn’t just between nations—it’s between the individuals making decisions within different institutional structures. Democratic leaders optimize for the next election cycle. Autocratic leaders optimize for strategic position decades hence.
Historical patterns of resource-based coercion reveal that rare earths follow well-established dynamics where control of strategic inputs generates leverage that outlasts the specific disputes that trigger its exercise. The 1973 Arab oil embargo demonstrated how resource exporters could weaponize supply against industrialized democracies, forcing policy changes through economic pressure. The affected nations—primarily the United States and European countries—responded by creating strategic petroleum reserves, diversifying suppliers, and improving energy efficiency. But these adjustments took decades and required sustained political will that wavered whenever oil prices dropped and the threat seemed distant. Japan’s rare earth vulnerability followed similar logic. After 2010, Tokyo announced initiatives to reduce dependency: funding research into rare earth alternatives, subsidizing domestic mining, stockpiling supplies, diversifying import sources. Fourteen years later, Japan remains substantially dependent on Chinese rare earths because the alternatives proved more expensive and technically difficult than the announcements suggested, and because when immediate crisis passed, political support for expensive resilience measures evaporated. The United States replicated this pattern almost perfectly. After watching Japan’s 2010 capitulation, American policymakers commissioned studies on rare earth vulnerability, announced domestic production initiatives, and warned about strategic dependencies. Yet by 2024, when Beijing deployed export restrictions during trade negotiations, American dependency had not decreased materially. The pattern reveals something about democratic governance: crises generate political will for resilience-building, but sustained resilience requires accepting costs during the years when coercion remains hypothetical, and democratic electorates reliably defund resilience spending during calm periods. China learned the opposite lesson from oil embargoes—not to fear resource cutoffs, but to become the nation capable of imposing them. Beijing spent decades consolidating rare earth production not through market competition alone but through strategic industrial policy that accepted losses during market downturns, subsidized expansion when democracies were reducing capacity, and treated rare earth dominance as national strategic objective rather than profit-maximizing business decision.
The competing narratives about rare earth coercion reflect fundamentally different assumptions about whether economic relationships should remain separate from political conflicts. The free trade framework that dominated policy discourse from the 1990s through 2010s treated economic integration as politically stabilizing—the theory held that nations dependent on each other for trade would avoid conflicts that disrupted mutually beneficial relationships. Under this logic, Japan’s reliance on Chinese rare earths created mutual dependency that should prevent coercion, because China needed export revenue as much as Japan needed inputs. The 2010 restriction shattered this assumption for Japan but not for the broader international system. Western policymakers treated the incident as aberration rather than revelation, continuing to build supply chains optimized for economic efficiency without accounting for political vulnerability. The alternative framework, articulated by strategic analysts and largely ignored by mainstream economics, argued that economic dependencies are inherently political and that nations will weaponize leverage when strategic interests outweigh trade benefits. This view predicted that China’s rare earth dominance would eventually be deployed for political purposes, but struggled to gain traction because it required accepting higher costs for uncertain future benefits—a difficult political sell. The 2024 episode forced reconsideration. When Washington capitulated to Beijing’s terms rather than face rare earth supply disruption, the narrative shifted from “economic integration prevents conflict” to “strategic dependencies enable coercion.” But this recognition came after the leverage was established and exercised. The policy question became not whether to prevent dependencies that already existed, but whether to accept the enormous costs of eliminating them. China’s narrative never wavered: rare earth production was always understood in strategic terms, as lever for advancing national interests when circumstances required. The consistency of Beijing’s approach—treating economic relationships as tools of statecraft rather than purely commercial transactions—gave it advantage over democracies that oscillated between free trade idealism and security realism depending on which party held power and whether recent coercion made vulnerability salient.
The verification challenge in assessing rare earth vulnerability lies in the gap between paper alternatives and operational reality when coercion actually occurs. After Japan’s 2010 capitulation, studies proliferated claiming diversification was achievable—rare earths exist in deposits outside China, recycling could reduce demand, substitution research could eliminate dependence on specific elements. These analyses were technically correct but operationally misleading. Yes, rare earth deposits exist in Australia, the United States, and elsewhere, but mining them requires years of permitting, environmental compliance, and capital investment that only becomes economically viable if Chinese supplies remain restricted long enough to justify the expense. Yes, recycling rare earths from electronic waste is technically possible, but the infrastructure for collection, separation, and reprocessing doesn’t exist at scale and would take years to build. Yes, research into rare earth substitutes might eventually produce alternatives, but “eventually” doesn’t help industries facing supply disruption measured in weeks. The gap between theoretical alternatives and practical availability meant that when China imposed restrictions, affected nations had no rapid response. American policymakers could announce initiatives to reduce dependency, but the timeline for those initiatives exceeded the timeline for industries to suffer irreparable damage from supply cutoffs. This verification problem creates information asymmetry that advantages the coercing nation. Beijing knows exactly how long alternative supply chains would take to establish because Chinese officials have access to detailed data on global rare earth deposits, processing capacity, and industrial requirements. Japanese and American leaders operate with higher uncertainty about whether alternatives are actually viable at the scale and speed needed. This asymmetry means the coercing nation can calibrate restrictions precisely—imposing enough pressure to force concessions but not so much that targets accept the enormous cost and political difficulty of building true independence. The threat of future coercion proves more effective than actual sustained cutoffs, because the threat maintains dependency while complete cutoff would eventually force diversification.
The consequences of rare earth coercion extend beyond the specific disputes that triggered export restrictions to reshape how nations approach economic relationships and strategic autonomy. Japan’s 2010 experience and America’s 2024 capitulation established precedent: nations controlling concentrated supply of strategic inputs can weaponize trade relationships for political objectives, and democracies dependent on those inputs will choose concessions over disruption. This precedent incentivizes other resource-controlling nations to consolidate supply chains for leverage, while simultaneously making democracies more hesitant to build dependencies in new domains—creating tension between economic efficiency and strategic security that affects decisions about everything from semiconductor production to battery materials to pharmaceutical ingredients. For individual nations, the consequence is erosion of policy autonomy. When Tokyo needed to respond to territorial disputes in ways that contradicted Beijing’s interests, rare earth dependency constrained Japan’s options. When Washington needed to impose trade restrictions China opposed, rare earth leverage forced negotiation rather than unilateral action. This pattern repeats across domains where supply chain optimization created dependencies—nations that might otherwise pursue policies based on domestic political preferences or alliance commitments find those options foreclosed by economic vulnerabilities they built through decades of efficiency optimization. The collective consequence for the international system is fragmentation of the globalized trade architecture that dominated 1990-2020. Nations are now deliberately accepting inefficiency to prevent dependency, rebuilding domestic capacity for strategic inputs regardless of cost, and treating supply chain resilience as security requirement rather than economic optimization problem. This reverses three decades of integration, raising costs and reducing growth while addressing vulnerabilities the previous system created. The irony is that the system being dismantled worked brilliantly for economic efficiency—it reduced costs, increased specialization, and generated enormous wealth. It failed catastrophically at preventing coercion, because the architects assumed economic relationships would remain depoliticized and mutual dependency would constrain both parties equally. China demonstrated those assumptions were wrong. Japan and America paid the price for learning that lesson. The question is whether other democracies can build resilience before they face similar coercion, or whether institutional bias toward short-term efficiency will keep creating vulnerabilities until coercion forces adjustment through crisis rather than foresight.
When democracies optimize for efficiency while autocracies build leverage, economic relationships become instruments of coercion, and the societies that value fairness discover their virtue created exploitable dependencies their adversaries will weaponize whenever strategic interests require.
Tags: China, Japan, United States, Rare Earths, Economic Coercion, Supply Chain, Geopolitics, Trade War, Strategic Resources, Democracy vs Autocracy, Resource Dependency