U.S. pushes back on China, invests in rare earth resources
U.S. officials are increasingly concerned about China's dominance over critical minerals used in advanced technologies.
China's control of critical minerals, including rare earth resources, creates both cost and supply issues for U.S. businesses and is prompting the U.S. to diversify supply chains and boost domestic production.
The U.S. Department of Defense on July 10 revealed a significant multibillion-dollar public-private partnership with MP Materials to build out a U.S.-based rare earth magnet supply chain, including rare earth extraction and refining capabilities. Rare earth magnets are critical components for advanced technology systems, including computer hard drives and other consumer electronics, satellite equipment and defense systems, and electric motors. China placed export restrictions on rare earth elements and rare earth magnets to the U.S. earlier this year.
Thomas Duesterberg, a senior fellow at the Hudson Institute, said this is a "huge step forward on U.S. policy" to solidify both a mining and a processing capability for rare earth resources in the U.S. Rare earths are a subset of critical minerals used in technologies with implications for U.S. national security, as well as for consumer electronics, medical devices and energy systems.
"Almost every advanced weapon you can think of uses rare earths," Duesterberg said.
China's dominance over critical raw materials used to build important technologies has become an issue that both Congress and the U.S. government have begun to strongly focus on.
Trade tensions draw focus to China's critical mineral dominance
After former President Joe Biden placed export controls on advanced semiconductors and AI technologies to China in 2022, the country retaliated by banning exports of critical minerals such as gallium and germanium to the U.S. The minerals are essential in the production of semiconductors, electronics and solar panels.
Tensions escalated further after President Donald Trump increased tariffs on China during his first administration for imports including electric vehicles, solar panels, semiconductors, electric vehicle batteries and aluminum and steel products.
Duesterberg said that in retaliation, China began to slow down contracts with U.S. businesses for critical minerals and rare earths.
"The Chinese began to use that dominance aggressively to counterattack against the U.S. trade sanctions," Duesterberg said. "If you can't get the basic magnets and other valuable and irreplaceable minerals, you can't have a business."
The U.S. is heavily reliant on critical mineral imports. The U.S. Geological Survey (USGS) reported that the U.S. is 100% reliant on imports for 12 of 50 minerals named on the List of Critical Minerals and more than 50% reliant on 28 critical mineral imports.
The USGS reported that China is a leading producer of 30 of 44 critical minerals.
While China produces its own minerals, it has also heavily invested in mining and refining capabilities worldwide in countries such as Indonesia and the Democratic Republic of the Congo for minerals like cobalt, nickel and rare earths. A report from Rice University's Baker Institute for Public Policy shows that China accounts for nearly 60% of rare earth mining and 85% of rare earth processing.
"China very methodically started buying up mines around the world with the most important critical minerals," Duesterberg said. "Even more importantly, they established a position in refining critical minerals, which is an environmentally nasty project."
U.S. will face challenges diversifying supply chain
Despite the U.S.'s significant reliance on critical mineral imports, there is a growing push from the federal government to diversify sources beyond China and establish greater domestic production capabilities.
Along with the DOD's MP Materials investment, Trump issued an executive order on June 30 to simplify funding for critical mineral projects.
Rodrigo Balbontin, associate director of trade, IP and digital technology governance at the Information Technology and Innovation Foundation, said permitting reform will be crucial for the U.S. to boost domestic production.
Trade negotiations affecting U.S. mining investments abroad and building connections with allies will also be critical to building the supply chain for critical minerals and rare earths, since the time to source minerals and build a domestic supply chain is a lengthy and daunting task, he said.
"The main thing is the timing," Balbontin said. " It's not something that you can really in-house immediately."
Indeed, changing the supply chain and increasing domestic production won't be a quick process, said Tom Brady, a professor at the Colorado School of Mines. Establishing a new mine, from mineral exploration to permitting to building, can take 20 years, he said.
"That permitting phase is taking longer and longer, gets held up in lots of litigation," he said. "That's when we're starting to stretch into multiple decades to have a project on the mining side that can develop the ore domestically. It's a long-time process."
Refining and smelting critical minerals and rare earths is the next step after the initial mining process. That’s where environmental concerns come into play, as refining can be a dirty process that the U.S. has preferred to export over the last several decades, Brady said.
For example, the U.S. only has two operating copper refining and smelting facilities. The U.S. is only able to supply 50% of its annual needs for refined copper, relying on imports for the other 50%.
Tariffs are one measure the Trump administration is attempting to use to corner businesses into not just building domestically, but sourcing products domestically, which is tricky when those products, like copper, are available in limited quantities domestically.
Trump placed 50% tariffs on copper imports starting Aug. 1.
"Companies can't eat that kind of an increase," Brady said. "It'll come right down to the customer."
Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining Informa TechTarget, she was a general assignment reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
