<p>Military development, driven by the trade of critical metals like rare earth elements (REEs), plays a key role in national security and global stability. These elements are indispensable for advanced defense systems, including weapons, communications, and surveillance technologies. Against this backdrop, this study investigates the responsiveness of REEs exports from China to developments within the US military industry, while taking into account Chinese governance practices and the current state of US-China tensions through the lens of contagion theory. Analyzing monthly data from January 1996 to December 2023, we employ the partial cross-quantilogram and the wavelet local multiple correlation methods due to the heavy-tailed nature of data. Our findings elucidate a strong positive correlation between Chinese REEs exports and US military development, spanning both bear and bull markets. Furthermore, REEs price volatility significantly constrains export volumes in bull markets, and the governance of China appear unfavorable in bear markets but favorable in bull markets in REE exports to the US. The interaction between China’s governance and US-China tensions indicates a positive correlation in the bull markets, suggesting the effectiveness of China’s governance practices in alleviating tensions. We advocate for effective governance strategies to address tensions between the US and China in advancing US military development goals.</p>