US and Allies Race to Break China’s Stranglehold on Critical Minerals

A Strategic Imperative Takes Center Stage

The United States is spearheading an urgent diplomatic initiative to reduce global dependence on Chinese critical minerals, convening allied nations for a pivotal meeting on February 4. This gathering of foreign ministers aims to establish a comprehensive agreement focused on diversifying and strengthening supply chains for resources that have become the lifeblood of modern technology and national defense. The initiative follows Beijing’s imposition of export restrictions on rare earths, measures that were temporarily delayed through a trade deal but have accelerated American efforts to build resilient alternatives. With Chinese officials actively leveraging their control over these vital inputs as geopolitical leverage, Washington is mobilizing its allies to create a new framework for mineral security that can withstand economic coercion and supply disruptions.

The stakes extend far beyond trade balances and economic statistics. Critical minerals serve as the foundation for everything from electric vehicle batteries and renewable energy systems to advanced fighter jets and semiconductor manufacturing. As tensions between Washington and Beijing continue to escalate, the ability to secure these materials without relying on Chinese supply chains has emerged as a fundamental national security priority. The upcoming meeting represents the most significant coordinated international effort to address this vulnerability, bringing together key stakeholders to craft a strategy that could reshape global resource networks for decades to come.

US officials have emphasized that securing critical mineral supply chains is a top priority for the Trump administration, with Treasury Secretary Scott Bessent leading the charge alongside Secretary of State Marco Rubio and Trade Representative Jamieson Greer. However, navigating the complex landscape of international mineral policy presents significant challenges, particularly when coordinating diverse economic interests and regulatory frameworks across allied nations.

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China’s Overwhelming Market Dominance

Understanding the urgency of the current diplomatic push requires grasping the sheer scale of China’s dominance in critical mineral supply chains. The country does not simply extract these materials from the ground—it has constructed a comprehensive ecosystem that spans mining, processing, refining, and manufacturing. According to data from the International Energy Agency, China refines between 47% and 87% of the world’s copper, lithium, cobalt, graphite, and rare earths. This control gives Beijing extraordinary leverage over global industries that depend on these processed materials, as raw minerals must undergo complex chemical refinement before becoming usable in advanced technologies.

The situation is even more stark when examining rare earth elements specifically. China accounts for approximately 70% of global mining operations and 90% of processing capacity for these strategic materials. This dominance did not develop by accident but resulted from decades of deliberate state investment and industrial policy that began in earnest after Deng Xiaoping’s famous 1992 observation that “the Middle East has oil; China has rare earths.” While rare earth deposits exist around the world, China systematically built the infrastructure and expertise needed to process these materials efficiently, often at prices that made it economically unviable for competitors to enter the market.

Beijing has demonstrated its willingness to use this dominance as a diplomatic weapon. In 2010, China cut off rare earth exports to Japan during a territorial dispute in the East China Sea, an action that awakened US and allied officials to the strategic vulnerability of relying on Chinese supply chains. More recently, China has imposed export restrictions on critical minerals destined for Japan’s military applications and announced measures extending to products containing even trace amounts of Chinese rare earths or manufactured using Chinese technology. These restrictions mirror the United States’ Foreign Direct Product Rule and would require companies worldwide to obtain licenses for products containing as little as 0.1% Chinese content.

“China has invested in mines and mineral processes over decades and now controls the raw ores and refining, as well as the downstream manufacturing,” said Hayley Channer, a rare earths expert at the United States Studies Centre at the University of Sydney. “In this way, it has built end-to-end supply chains.”

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The Critical Minerals Landscape

Critical minerals encompass more than 50 elements and substances that the United States has designated as essential to economic prosperity and national security. This list ranges from familiar industrial metals like copper and lithium to more obscure elements like neodymium, which enables the powerful magnets used in electric vehicle motors, wind turbines, and high-performance speakers. What makes these materials “critical” is not their scarcity but their indispensability—small amounts are essential for manufacturing, and no practical substitutes exist for many applications.

The refinement process presents perhaps the greatest challenge for nations seeking to reduce Chinese dependence. Extracting minerals from the earth represents only the first step in a complex supply chain. The raw ore must undergo separation, concentration, and chemical processing to become usable in manufacturing. This midstream processing is chemically complex, resource intensive, and often environmentally damaging. Establishing new processing facilities requires substantial investment, with rare earth refineries costing approximately $500 million on average. The lengthy timeline for bringing such facilities online further complicates rapid diversification efforts.

Critical minerals appear throughout modern life in ways that consumers rarely recognize. Lithium-ion batteries power everything from smartphones and electric vehicles to grid-scale energy storage systems. Rare earth magnets enable the compact motors in electric cars and the precision guidance systems in advanced weapons. The F-35 fighter jet incorporates these materials in its radar arrays, sonar systems, and electronic warfare capabilities. Even everyday items like computer hard drives, medical imaging devices, and catalytic converters depend on steady supplies of these specialized elements. Without reliable access to critical minerals, entire industrial sectors face potential shutdowns—US auto executives have warned that supply disruptions could halt American automotive production within weeks.

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The Multi-Pronged US Strategy

The Trump administration has developed a comprehensive strategy to reduce Chinese dependence that operates on multiple tracks simultaneously. On the domestic front, officials have focused on expanding American mining and processing capabilities through streamlined permitting, financial incentives, and direct government investment. The Department of Defense recently took a 15% stake in US-based rare earth producer MP Materials for $400 million, establishing a price floor for key products and providing an offtake agreement that guarantees demand. This public-private partnership model provides the investment certainty needed to attract capital to projects that might otherwise struggle in volatile commodity markets.

The administration has also opened federal lands to increased mineral exploration and moved to streamline the notoriously lengthy permitting process. Building a new mine in the United States currently takes an average of 29 years—the second longest timeline in the world—due to overlapping federal, state, and local regulations. A single project can require up to 30 permits, many of which are duplicative. Reforming this process has received bipartisan support, with both the Trump and Biden administrations supporting efforts to accelerate permitting while maintaining environmental protections.

Recognizing that domestic resources alone cannot meet American demand, the strategy also prioritizes international partnerships with allied nations. The United States has signed a minerals deal with Ukraine and is pursuing agreements with countries possessing significant reserves but lacking Chinese-dominated processing infrastructure. Treasury Secretary Scott Bessent has emphasized the importance of setting price floors and implementing forward buying mechanisms to ensure market stability, noting that the United States would pursue these measures “across a range of industries” rather than limiting intervention to rare earths alone.

Trade Representative Jamieson Greer has stressed the need for resilient supply chains and the creation of economically viable markets for critical minerals through international cooperation. This approach combines incentives for domestic production with strategic investments in allied countries, creating a diversified network of suppliers that can withstand individual disruptions. The strategy also leverages financial tools from the Development Finance Corporation, Export-Import Bank, and Defense Production Act to support mining and processing projects in friendly jurisdictions.

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Global Coordination and Allied Responses

The February 4 meeting of allied foreign ministers represents the latest step in a broader international effort to coordinate responses to Chinese mineral dominance. In January, finance ministers from G7 nations including Japan, Britain, France, Germany, Italy, and Canada met in Washington alongside officials from Australia, Mexico, South Korea, and India to discuss supply chain resilience. Japanese Finance Minister Satsuki Katayama told reporters that there was “broad agreement on the need to swiftly reduce reliance on China for rare earths” and outlined policy approaches spanning short, medium, and long-term horizons.

“I stressed the importance of committing to these measures,” Katayama said regarding proposals for creating markets based on standards such as respect for labor conditions and human rights, as well as deploying a range of policy tools including support from public financial institutions, tax and financial incentives, trade and tariff measures, quarantine measures, and minimum price setting.

European nations have approached the challenge with a mix of urgency and caution. While the United States has encouraged some European Union member states to sign bilateral memorandums of understanding, the European Commission has advised maintaining a united front to maximize collective bargaining power. German Finance Minister Lars Klingbeil has emphasized that Europe must move faster to develop its own supplies of important raw materials, warning that “neither complaining nor self-pity helps us—we have to become active.” He noted that discussions at the G7 meeting included potential price floors for rare earths and partnerships to boost supplies, but cautioned that talks had just begun with many unresolved issues.

South Korean Finance Minister Koo Yun-cheol has emphasized the importance of strengthening global value chains based on comparative advantage, with particular focus on recycling critical minerals for resilient supply chains. Canada and Australia have emerged as key partners in this effort, both possessing significant mineral reserves and established mining industries. The recent US-Australia Framework for Securing of Supply in the Mining and Processing of Critical Minerals and Rare Earths represents a significant step toward creating non-Chinese supply networks, with both governments prepared to take ownership stakes in projects valued at $8.5 billion.

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Policy Recommendations and Legislative Action

Think tanks and policy experts have offered detailed recommendations for strengthening critical mineral security. The Center for Strategic and International Studies has proposed seven specific measures, including creating a renewed Bureau of Mines to coordinate domestic mining development, developing incentives to safeguard US industries, and reforming the US International Development Finance Corporation to better finance minerals projects. These recommendations emphasize the need for a balanced approach that combines domestic production expansion with strategic international partnerships.

One particularly important recommendation calls for adding copper to the Department of the Interior’s critical minerals list. Although not currently classified as critical, copper consumption in the United States reached 1.8 million metric tons in 2022, making it the second largest consumer globally after China. Copper is essential for infrastructure, clean energy technologies, defense applications, electronics, and automotive systems. The artificial intelligence industry alone could demand up to 200,000 metric tons of copper annually between 2025 and 2028 for data center infrastructure, adding substantial pressure to already tight supplies. Designating copper as critical would make it eligible for existing and future incentives, encouraging investment in domestic refining capabilities.

The Carnegie Endowment for International Peace has advocated for a comprehensive metals industrial strategy that balances onshoring through domestic mining and offshoring through international supply chain development. Their analysis reveals that even under optimistic scenarios, US domestic production would only meet projected demand for zinc and molybdenum by 2035. Substantial imports of copper, graphite, lithium, silver, nickel, and manganese would still be required to support industrial expansion and grid modernization. This reality underscores the importance of developing reliable partnerships with allied nations rather than pursuing pure self-sufficiency.

Policy tools such as guaranteed price contracts with miners and processors—modeled on the MP Materials arrangement—could provide investment certainty through shared upside mechanisms. Rather than blanket tariffs, which can raise costs for domestic manufacturers, contracts for difference could establish strike prices while allowing market forces to operate. This approach provides price certainty for investors without the economic distortions associated with protectionist measures.

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The Path Forward: Challenges and Timelines

Despite the urgent focus on reducing Chinese dependence, experts warn that creating resilient alternative supply chains will require sustained effort over an extended period. Analysts from Adamas Intelligence estimate that with “sustained policy and investment momentum,” the United States and its allies will need 10 to 15 years to create supply chains with the breadth and depth to support growing demand. This timeline reflects the complexity of building not just mines but entire processing ecosystems that can compete with established Chinese infrastructure.

Current import volumes illustrate the scale of the challenge. The United States imports approximately 10,000 tonnes of rare earth magnets from China annually, while Europe imports more than 25,000 tonnes. Demand in both regions is projected to grow by multiples over the next decade, driven by the expansion of electric vehicles, renewable energy systems, and defense applications. Meeting this demand through non-Chinese sources requires simultaneously expanding mining capacity, building processing facilities, and developing manufacturing capabilities for end products like magnets and battery components.

Ryan Castilloux, founder and managing director of Adamas Intelligence, noted that China’s proposed export controls could make existing supply chain disruptions seem like a “minor inconvenience.” If fully implemented, the new rules would require licenses for products containing trace amounts of Chinese materials or technology, potentially amplifying existing bottlenecks and assembly line disruptions manifold. This prospect has accelerated efforts to develop alternative sources, but technical expertise gaps, environmental concerns, and capital requirements continue to present significant hurdles.

“Even with strong political will, the permitting, financing, and technical ramp-up of these complicated projects can’t be sped up too much,” said Ross Chandler, a postdoctoral fellow at Australian National University who studies critical minerals. Describing the effort to reduce dependence on China, he characterized it as a “multi-decade process.”

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China’s Strategic Calculations

While Western nations mobilize to reduce their dependence, analysts suggest that China’s export control strategy may require recalibration. The use of rare earth restrictions as a diplomatic tool has historically produced mixed results, often accelerating the very diversification efforts Beijing seeks to discourage. When China curtailed exports to Japan in 2010, the World Trade Organization ruled that the measures violated international trade rules, prompting Beijing to withdraw them while prompting Japan and other nations to develop alternative sources. The current wave of restrictions appears to be producing similar effects, with major consumers like the United States, Japan, and the European Union rebuilding domestic refining capacity and deepening supply links with other suppliers.

Analysts from the East Asia Forum argue that tighter export controls have provided further incentives for China’s resource-rich partners to align more closely with Washington and insulate their supply chains from potential Chinese constraints. Australia, which has sought to stabilize economic engagement with China under Prime Minister Anthony Albanese, nevertheless opted to deepen cooperation with the United States through the critical minerals framework. This pattern suggests that China’s resource diplomacy may be strengthening the non-Chinese supply ecosystem rather than securing Chinese dominance.

Some experts suggest that China could benefit from a more targeted, rules-based approach that focuses narrowly on legitimate national security concerns while maintaining open trade with trusted partners. Exempting partners like Japan and the European Union from broad restrictions might help sustain diversified economic networks and reduce perceptions of coercion. Establishing greater predictability and stability in China’s role as a global supply chain hub could maintain cooperative relationships under external pressure, potentially preserving market share even as Western nations develop alternative sources.

Ultimately, the competition for critical mineral supply chains reflects broader geopolitical tensions between the United States and China. While reducing mineral dependence may not eliminate strategic rivalry, it could limit Beijing’s ability to use economic leverage during future conflicts. The success of this diversification effort will depend on sustained political commitment across multiple administrations, substantial financial investment, and effective international coordination over the coming decade.

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The Bottom Line

• The United States is leading an international effort to reduce dependence on Chinese critical minerals, with a key meeting of allied foreign ministers scheduled for February 4.
• China controls between 70% and 90% of global processing capacity for rare earths and significant portions of other critical minerals, giving it substantial leverage over global supply chains.
• Critical minerals are essential for modern technology including electric vehicles, renewable energy systems, defense systems, and semiconductor manufacturing.

The US strategy combines domestic production expansion through streamlined permitting and financial incentives with international partnerships to create diversified supply networks.

• Building non-Chinese supply chains will require 10 to 15 years of sustained investment, with current import volumes at 10,000 tonnes annually for the United States and 25,000 tonnes for Europe.

China’s recent export controls on products containing trace amounts of Chinese materials or technology have accelerated diversification efforts by Western nations and their allies.

Policy experts recommend a balanced approach combining domestic development with strategic international partnerships rather than pursuing pure self-sufficiency.