No images? Click here
Weekend Reads
This week, the United States Department of Defense announced a deal to purchase a stake in American rare earths company MP Materials, a major development for ongoing US-China economic competition. Last month, President Donald Trump negotiated a pause to Chinese rare earths export restrictions that otherwise might have ground the US auto industry to a halt.
This vulnerability underscored the strategic importance of breaking China’s critical mineral dominance. In a new policy memo, William Chou lays out the bureaucratic means Beijing has used to create and maintain this near-monopoly and offers a strategy to overcome it. His key points are below.
Key Insights
1. China has long used its control over critical minerals and rare earths as a geopolitical weapon.
In September 2010, China cut off rare earth element exports to Japan after a Chinese fishing trawler collided with Japan Coast Guard vessels off the disputed Senkaku Islands in the East China Sea. In August 2023, in response to increased American restrictions on chip exports to China, China’s Ministry of Commerce (MOC) announced strict export controls on germanium and gallium, which are crucial to making semiconductors and fiber-optics. China’s latest salvo in this mineral coercion campaign occurred on April 4, when Beijing responded to the Trump administration’s April 2 reciprocal tariffs with export restrictions.
2. Bureaucratic procedure is central to Beijing’s rare earths economic coercion campaign.
China leverages its bureaucratic procedure in three ways: (1) throttling adversaries’ access to critical minerals, (2) forcibly acquiring foreign technology, and (3) overtaking and dominating manufacturing supply chains related to rare earths. Beijing’s endgame is for Chinese producers to control the entire supply chain and to possess a significant share of final goods. Foreign assemblers will be in the unenviable position of facing stiff Chinese competition while remaining utterly dependent on Chinese components.
3. The US needs to work with allies to break China’s monopoly.
Allied cooperation is also necessary for creating new non-Chinese sources of critical minerals. Though the Mountain Pass mine in California, managed by the firm MP Materials, remains the only active rare earths mine in the United States, there have been new projects announced this year. Australian mining firm Lynas received $258 million from the Department of Defense to build a heavy rare earths refinement facility in Texas. Other foreign cooperative efforts for critical minerals include: (1) American firm MP Materials’ memorandum of understanding with Saudi Arabia’s national mining company, Maaden, to collaborate on establishing a rare earths supply chain in Saudi Arabia and (2) Tokyo’s agreement with Japanese gas firm Iwatani to invest $120 million in a French rare earths project.
Quotes may be edited for clarity and length.
Go Deeper
Representatives Kevin Hern (R-OK), Troy Downing (R-MT), and Joe Wilson (R-SC) will join Michael Sobolik for a panel discussion on the full-spectrum competition between the US and China and how policymakers can protect American interests.
James Litinsky, founder, chairman, and CEO of America’s only rare earths mining and processing facility, MP Materials, sat down with Mike Gallagher last fall to discuss the importance of the American critical minerals industry for winning the new cold war.
With Japanese upper house elections looming, Tokyo still needs to strike a trade deal with the US to stave off tariffs. The extension President Trump recently granted will be crucial, argued William Chou on World Business Report.
Robotics is emerging as a field of critical strategic value. Michael Sobolik will host an event this Tuesday, July 15, at 2:00 p.m. to introduce his new Hudson policy memo featuring recommendations for the Trump administration and Capitol Hill to help secure America’s innovation advantage.
